In a statement shared with Finbold.com, Stacey West, principal consultant for FICO® Advisors, explained: According to FICO’s principal consultant, the upcoming April’s data will show whether the easing of lockdown has an impact – and what sort of financial pressure that might create:
Spend on UK cards decreased along with the percentage of payments
The average spend on UK credit cards fell by £33 to £547 in February 2021, with sales 16 percent lower than a year ago. “This drop is opposite to the usual trend we see at this time of year,” continued West. “However, with a full lockdown in place, the uncertainly surrounding foreign summer holidays ongoing and the ongoing vaccination programme, this is not unexpected.” What will ring alarm bells for card issuers is that the percentage of payments to balance fell by 8 percent in February and is now only 2 percent above February 2020. This is despite average card balances falling £33 or 2 percent and reaching another over a two-year low. With lower balances, the expectation might be that the percentage of payments continues to increase but this was not the case in February. It appears consumers may have decided to pay less of their debt, either in anticipation of the easing of lockdown or because they had no choice.
Missed payment rates decrease
Historically, the percentage of accounts missing one payment decreases after the impact of Christmas and sales spending in January. February 2021 was no different. However, the decrease was lower than in 2020. Unsustainable Christmas spending normally increases two missed payments. But the FICO data for February 2021 shows a decrease in both the proportion of accounts with two missed payments and the balances at 33 percent and 16 percent lower, respectively, than the same time last year. The average balances on accounts missing one, two or four-plus payments increased, although at a lower rate than they did in February 2020. Average balances on accounts missing two payments are £217 or 9 percent higher than a year ago. This has been driven by accounts more than one-year-old as those under a year old saw a second consecutive fall. Three missed payment average balances are £493 higher year on year and four missed payments plus are £372 up, an over two-year high.
Card limits remain stable, but the average amount over-limit continues increasing
Average card limits increased £10 in February but are £10 lower year on year. Limits on accounts opened less than a year have fallen £105 over the last two months. The highest proportion of accounts — 29 percent — remain in the limit range of £5,001 to £10,000, with an average balance of only £1,134, again reaching an over two-year low. The percentage of accounts going over their limit fell to another over two-year low and is now 53 percent less than it was in February 2020. However, for those exceeding their limit, this has increased once more, reaching yet another over two-year high at 30 percent higher than a year ago.
Cash usage downward trend continues
The percentage of consumers using their cards to withdraw cash fell a further 7 percent in February and is now 59 percent lower year-on-year. But cash as a percentage of total spend increased for the second consecutive month – by 3 percent – suggesting that those using cash on their card continue to do so with a higher amount. Again, issuers could use this information to contact their high cash users to understand their financial position as these types of spend typically incurs higher interest rates. These card performance figures are part of the data shared with subscribers of the FICO® Benchmark Reporting Service. The data sample comes from client reports generated by the FICO® TRIAD® Customer Manager solution used by some 80 percent of UK card issuers.
