News & Views - Savantor

Waning consumer credit card usage

Monday, 02 April 2007

Are UK cardholders finally falling out of love with the credit card 40 years after its introduction to the UK?  An interesting article in this month's European Card Review highlights the trend in the UK industry illustrating the recent decline in outstanding card balances which fell by 2% in 2006.  At the same time debit card usage is increasing particularly for small value payments – a trend which will only increase following the introduction of contactless later this year.  Over the Christmas period 2006, debit cards accounted for 63% of spending on UK plastic.  The value of spend on debit was 15% up on the previous December while credit card spend fell by 0.8%.

There has certainly been a move over the last two years for cardholders to take more control over the amount of household debt and the switch to increased use of debit is a logical extension of this trend.  Reward systems offering points or cashback are less attractive when control of the purse strings is the issue.

So now we see zero balance offers are declining, APR's are on the increase and we are likely to see the return of annual credit card charges.  This would seem to indicate that we are likely to see card issuers focus more on retaining existing cardholders rather than attracting new customers and looking more closely at closing dormant accounts in order to reduce costs.  The temptation to increase charges on debit card usage may also be too hard to resist for issuers.

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