Home Finance Credit card balances creep up as cost of living starts to bite

Credit card balances creep up as cost of living starts to bite

by uma
gawdo

 

  • After several months of falls, outstanding balances on credit cards have started to creep up again with balances up 3.8% year on year.
  • Spending had been more muted the previous year due to the pandemic.
  • There were 1.2bn contactless transactions in January 2022. This is a 78.7% increase on Jan 2021 and a 31% increase on January 2020.
  • The total value of contactless transactions in January 2022 was £16.3bn. This is a huge increase on the previous two years and fuelled by the contactless card limit being increased to £100.

UK Finance has issued card spending data for January 2022 Card Spending Update – January 2022.pdf (ukfinance.org.uk)

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown:

“Today’s data shows further signs the pandemic savings boom is unravelling with outstanding credit card balances on the rise after months of decline. Subdued spending habits during the pandemic meant we could put more away for a rainy day and we were less likely to put purchases on the plastic and not pay them off in full.

There was always going to be something of a financial hangover post-Christmas, but the concern is that these outstanding balances are also a sign that the rising cost of living is starting to bite. We are increasingly having to burn our way through our lockdown savings to meet everyday expenses and using our credit cards more to fill any gaps.

The pandemic has also had a huge effect on how we use our cards with contactless transactions continuing to rise steeply. Many shops were reluctant to handle cash during lockdown and it looks to have fallen further out of favour with the recent increase in contactless limits set to £100.”

 

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