News and resources on payments systems, innovations and initiatives worldwide.

UK Finance: Credit card spending fell 50 per cent in first month of lockdown

Source: UK FInance

The value of credit card transactions in April dropped to £8.7 billion, half the value compared to April 2019, UK Finance data reveals.

In the first full month of social distancing measures the number of credit card transactions by UK cardholders also witnessed a sharp fall of 45.9 per cent to 163 million, the lowest level in over nine years, as borrowers cut down on credit card spending in the face of the coronavirus pandemic.

In comparison, expenditure on debit cards remained robust. Whilst the number of debit card transactions in April 2020 was 5.1 per cent lower than the previous year, the total value of these transactions rose by 0.9 per cent to £51.8 billion. This suggests some consumers may be acting more cautiously amid the current economic uncertainty and choosing to spend on their debit rather than credit cards.

Outstanding balances on credit cards fell by almost £4.7 billion in April 2020, the largest monthly fall in over a decade, as many people opted to make repayments rather than spend on their credit cards. This follows a £3.1 billion fall in outstanding balances on credit cards in March 2020.

Reduced opportunities to spend in shops due to the Covid-19 lockdown also led to a record proportion of card transactions being made online in April. Whilst total card spending fell, one third (34.3 per cent) of the total value of debit and credit card transactions was made online, up from 29.6 per cent the previous year. Similarly, 16 per cent of the volume of card transactions was through online purchases, an increase from 13.3 per cent in April 2019 and the highest monthly figure on record.

Contactless card spending saw a notable drop in April with 404 million transactions in the UK, a 44.3 per cent reduction from 725 million the previous year and the lowest monthly figure since February 2017. The total value of all contactless transactions was £4.1 billion, a 40 per cent decrease from £6.8 billion in the same month in 2019. This fall is likely to have been impacted by reduced opportunities to spend in the retail, transport and hospitality sectors. April was also the first month when the average value of a contactless payment surpassed £10. This may be a result of fewer low-value transactions, such as on public transport where contactless cards are often used for payment. The industry raised the payment limit on contactless cards to £45 from 1 April, to support consumers who choose to pay using contactless at this time.

Eric Leenders, Managing Director of Personal Finance, UK Finance, said:

‘The Covid-19 crisis has significantly changed how, where and when people spend their money.

‘The banking and finance industry has put in place a number of measures to help customers adapt to this new economic environment and pay in a way that suits them. This includes increasing the contactless limit to £45 and offering deferrals on credit card repayments.

‘As the economy begins to open up, the sector will continue to support customers to help them through this difficult time.’

Comments: (0)