In the face of ongoing economic pressures, the latest data from UK Finance reveals that credit card spending is on the rise. The report highlights a 0.8% year-on-year increase in total credit card spending and a notable 5.9% rise in contactless transaction values, reflecting consumers’ growing reliance on credit for managing daily expenses.
Rising Credit Card Usage
James O’Donnell, Director of Research & Consulting at TransUnion, commented on the findings:
“The UK Finance card spending report for March 2024 shows a continued increase in consumer credit card usage amidst ongoing economic pressures. The trend suggests that consumers are increasingly relying on credit to manage their daily expenses, driven by high inflation and stagnant real wage growth.”
The data indicates a 9.9% growth in outstanding credit card balances over the past year. However, the percentage of these balances accruing interest has slightly decreased by 0.5% to 4.98%, indicating that while consumers are using credit more, they are also making efforts to manage their debt responsibly.
Shift from Debit to Credit
The report also points to a subtle yet significant shift in spending preferences from debit cards to credit cards. This shift, although small, underscores the increasing need for consumers to rely on credit for everyday spending as they navigate the financial challenges posed by rising living costs.
TransUnion’s latest consumer pulse study revealed that 45% of UK adults feel their household income isn’t keeping pace with inflation. O’Donnell emphasized the importance of responsible credit management and the role of financial institutions in providing the necessary tools and resources to support informed borrowing decisions:
“Financial institutions must provide the tools and resources to support informed borrowing decisions. TransUnion remains committed to assisting lenders in creating a comprehensive financial picture via access to the most up-to-date affordability information available, fostering responsible borrowing practices, and promoting consumer wellbeing during these challenging times.”
Surge in Contactless Payments
The popularity of contactless payments continues to grow, with the number of contactless cards in the UK surpassing 150 million for the first time in March 2024. Contactless cards now represent 93% of all cards in issue in the UK.
In March 2024 alone, there were 1.59 billion contactless card transactions, marking a 5.9% increase compared to March 2023. Within this total, contactless debit card transactions rose by 5.3%, while contactless credit card transactions surged by 9.3%. Contactless payments accounted for 76% of all debit card transactions and 63% of all credit card transactions during this period.
The total value of contactless transactions reached £25.1 billion in March 2024, a 10.2% increase from March 2023. Overall spending across all card types, including contactless, online, and chip and pin, amounted to £75.8 billion, with a total of 2.2 billion debit and credit card transactions made in the month.
Popularity of Contactless Payments
Janine Randolph, Head of Data Management at UK Finance, highlighted the ongoing popularity of contactless payments:
“Contactless cards continue to be a very popular way of consumer spending, whether that’s using a physical card or through a mobile phone. There are over 150 million contactless cards now in issue and across these people spent over £25 billion on them in March alone.”
Conclusion
The rise in credit card spending and the increasing use of contactless payments reflect the evolving financial habits of consumers as they adapt to economic pressures. As credit card usage continues to grow, the focus on responsible borrowing and financial management becomes even more crucial. Financial institutions play a key role in supporting consumers through these challenging times by providing the necessary resources to manage credit effectively.
