FICO released its quarterly UK cards data showing that average credit card limits are at their highest point in over two years. Consumer spending has also increased, while delinquency rates are down. However, card utilisation rates are at a two-year low, suggesting that some card issuers may need to reassess how and when they offer more credit.
Data from the latest FICO Benchmark Reporting Service revealed that the average creditlimit for Classic credit cards has risen by 3.9% over the year. The increase was primarily driven by new accounts (under a year old) and established accounts (open between one and five years), which have both seen an increase of more than 6% in the last 12 months. Veteran accounts (those that have been open for more than five years) have experienced a more modest average increase of 1.4%.
Consumer card spending has also increased to its highest point in two years (up 7.6% year-on-year), perhaps indicating a strengthening of consumers’ confidence in their ability to repay card debt. This is borne out by the latest data around delinquency patterns. One-cycle balances (where a customer misses a payment for one month) are at their lowest in more than two years, having dropped by more than 16% in the last 12 months.
“The increase in consumer spending and reduction in delinquencies are good news for card issuers,” said Nigel Brayne, senior director of Global Business Consulting at FICO. “When they see that these areas are becoming more stable, lenders may offer higher credit lines in order to increase individual customer value.
“However, the lower utilisation figure suggests that card issuers are not always offering additional credit to the customers most likely to use it,” Brayne added. “We believe there is scope for lenders to review their offer qualification criteria to ensure they are targeting not only low-risk, profitable customers, but those most likely to spend the extra credit that is made available to them. Ensuring that funds are used will not only help card issuers to operate more efficiently and profitably, but it will also help them mitigate the potential impact of unused exposure on their Basel Capital Reserves.”
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