Outstanding balances on credit card accounts have contracted by 20.7% over the 12 months to January, according to new figures published by UK Finance.

The banking body suggested this is as a result of repayments outstripping new borrowing in the year.

UK Finance also revealed that there were 196 million credit card transactions during January, which was a total 32.9% down from December, and 31.1% fewer than in January last year. The total spend of £10.7bn was 27.6% less than in December and 37.9% less than January 2020.

For debit cards, there were 1.2 billion transactions recorded in January. This was 26.6% fewer than in December and 18.1% fewer than in January 2020, while the total spend of £47.8bn was 18.8% less than in December and down by 7.3% from January last year.

Across both, the card spending figures revealed there were 1.2 billion debit and credit card transactions in the UK in January, a figure down by 26.7% compared to December, and by 23.6% from January last year. The total spend of £53.2bn reflected falls of 17.5% from the the previous month, and 10.5% compared to January 2020.

Commenting on the figures, Hargreaves Lansdown personal finance analyst, Sarah Coles, said the pause on card spending has been “dictated by the banks”.

“In the first quarter of this year, they were approving a smaller proportion of card applications and cutting credit limits,” Coles said. “Their key concern was that they didn’t want to take as much risk as they had during more buoyant periods.

“One consequence of this is that borrowers who tend to switch to avoid paying interest have been finding life slightly harder. It’s one reason why the percentage of credit cards bearing interest has risen slightly to 56%.

“However, a big part of the reason we were spending less in January was seasonal. After the festive splurge, we always tend to rein back spending, and hunker down for winter, so demand for credit cards fell at the start of 2021. This particular season is almost over. The banks are expecting demand to pick up again, especially as the economy reopens, so we can expect credit card spending to return, at least to some extent.”

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