News & Views - Savantor

No happy Christmas for Credit cards

Wednesday, 30 November 2011

Several surveys have reported recently on spending trends for the festive season and none of them seem likely to put a smile on issuer’s faces.  Unsurprisingly significantly fewer people will be using a credit card to pay for Christmas this year, according to new research by Legal & General.  The survey revealed that around 1.6 million families could find Christmas unaffordable. Around a third of households paid for Christmas with credit cards last year, but this number is expected to drop to a fifth this year.  With increasing pressure on household incomes coming for all directions, a third of households are planning to spend less on gifts this year.  67% said they had enough money put aside for Christmas, while in the London and West Midlands, just 60% of people said they had enough money saved for the festive season.  People in the north of England are the best prepared, with 79% saying they had saved enough money to pay for what they need, while in Wales and Scotland the figures fell to 72% and 68 % respectively.  Legal and General’s research indicates that almost 80% of households are worse off this year than they were last year.

Credit card holders in the UK are paying less off their balance than at any point during the last two years.  The trend was noticed among ‘classic’ card accounts taken out within the last five years.  The latest figures from the FICO Benchmark Reporting Service also revealed that the number of classic cardholders using credit cards for cash withdrawal is at the highest level for the last two years.  The average credit limit on classic cards continued to decline according to the report and has now fallen 4.3% since March.

Despite stores offering tempting cut-price deals, shoppers are in a cautious mood in the run up to Christmas according the British Bankers’ Association (BBA), and while consumers spent a total of £7.2 billion on plastic, they repaid £7.4 billion.  This continued a trend from September which also saw a higher level of repayments than new spending, with £6.9 billion being spent on cards and £7.2 billion being paid back.

Maybe the increase in spending via mobile devices will alleviate some of this but along with the prospects for the general economy the future for credit cards continues to look less than bright.

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