The FICO UK Credit Card Market Report for December 2023 reflects the usual season trends in spending and payments. However, it also reflects the impact of continued high prices on card balances. This latest report shows the highest levels of both average spending and average balances since 2006 when FICO first analysed credit card use and payments.

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Increases in spend always occur in December, and 2023 was no exception with a 5.9% month-on-month rise, taking the average spend to £850. This is the highest spend since FICO records began in 2006.

The average balance continued to trend upwards, as expected in the lead-up to Christmas. December 2022 saw record average balances. In December 2023 that record was broken with average balances up 2.2% month-on-month and up 7.2% year-on-year. The average balance now stands at £1,780. It is anticipated that this trend will fall post-Christmas, however with prices remaining high lenders will want to monitor closely how much it will fall, and for how long it will remain lower.

Another pattern typical of December was the amount paid off credit card balances as shoppers focussed their cash flow on Christmas spending. In December 2023 the average balance paid off dropped slightly, by 0.16%, month-on-month. However, this measure has been trending down since July.

Pre-COVID, the average payment compared to the overall balance was approximately 30%, but with lockdown and increased savings, this rose to 42%. The FICO data now shows this dropping back, although it is currently still 6% higher than before the pandemic.

Another sign of pressure on finances was the number of customers missing one, two, and three payments. This increased from November to December 2023, with the largest increase seen for those missing one payment: a 14.8% increase month-on-month and a 0.5% increase compared to 2022. Again, seasonality influences results with similar volumes expected in January due to the post-Christmas spending hangover. Lenders will also want to be mindful that more customers missing one payment in December will likely roll over into two payments in January.

Issuers should note that established customers – those who have had their credit card for between one and five years – are the most likely to miss payments. This group contains customers whose 0% offers have expired, and they are now paying off balances at the standard rate. FICO recommends monitoring this group for signs of vulnerability and indebtedness. Now is a great time to review existing collections strategies and examine whether anything more can be done to identify and assist financially distressed customers proactively.