Lockdown left credit card balances down 12.6% in May

The final month of full lockdown saw the annual growth rate of outstanding credit card balances fall by 12.6% in the year to May, as consumers continued to pay down their credit card bills, new UK Finance figures have revealed.

May also saw credit card spending by UK cardholders slowly recover against the previous month, as the country moved past the initial shock of lockdown, with the total value of credit card transactions rising to £9.6bn from £8.7bn in April.

However, the value of spending on credit cards was 44.7% less than in the same month a year earlier, which the banking body suggested could reflect reduced demand for big ticket items often bought on credit. Debit card transactions saw a drop of 7.9% on the previous month, with a total spend of £47.7bn.

This was 7.8% lower than in May 2019, while overall, UK Finance indicated that card spending in the UK during May was down 39% year-on-year, as people continued to react to the impact of COVID-19.

“The pandemic continued to have a huge impact on how people spent their money in May, with restrictions impacting spending for both credit and debit card customers,” UK Finance managing director of personal finance, Eric Leenders, commented. “Maintaining the downward trend over the last few months, consumers continued to pay off their credit card balances in May.

“The banking and finance industry has a clear plan to help the country through this unprecedented period and has put in place a number of measures to help customers adapt to the new economic environment including the contactless limit increase to £45 and support for those struggling with their finances.”

The data showed that retailers across the country continued to encourage customers to use contactless payments, which drove £4.5bn of spending across 440 million transactions. This was an increase from 404 million in April. However, the figures also showed this was still down 39.1% from the same month in 2019.

“As the economy begins to open up, we anticipate spending levels to increase and the industry will continue to support customers to help them through this difficult and uncertain time,” Leenders added.

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