According to the “FICO UK Credit Card Market Report: January 2023” report, people spent, on average, £755 using their credit cards. This shows an 8% drop compared to December 2022, when people spent, on average, £825.

However, although more people missed two consecutive payments between December and January, the average balance on credit card accounts with two missed payments was just 1.9% lower month-on-month.

The overall balances across all accounts were just 0.6% lower in January 2023 than in December 2022, dropping to £1,650.

“There may be some comfort in the fact that the average balance of two missed payments continues to decrease and has been dropping since October 2022”, the report states.

“Lenders will also welcome the fact that the number of consumers missing one payment in January dropped month on month – usually in the first month of the new year, there is an increase in one-month missed payments”, the report continues. “However, this needs to be balanced against the fact that we saw a high increase in one-month missed payments in December, so this is more of a levelling off than a reduction and the percentage is still high. The percentage of payments to balance has also increased by 2.4% month-on-month after decreasing from September 2022”.

How the cost-of-living crisis is impacting the market

The cost-of-living crisis has significantly squeezed people’s budgets and ability to afford new purchases.

In this context and separate from the FICO report, the buy-now-pay-later sector has suffered significant losses as a result of more people defaulting on their short-term loans.

In February, Klarna’s losses rose by 40% in FY2022, reaching $1bn from $680m registered in the prior fiscal year. Klarna CEO Sebastian Siemiatkowski promised to make “concrete steps towards profitability” in an effort to reassure jittery shareholders.

According to a GlobalData survey conducted in September 2022, 67% of respondents said they owned a credit card. In the UK, that figure stood at 75%, with 56% of respondents holding one credit card at the time and 27% claiming to have two.