As the cost-of-living crisis takes hold in the U.K., Fair Isaac's ( NYSE: FICO ) credit card data from June to August signaled a period of financial stress and worrying trends for lenders due to inconsistent consumer behavior.
Average card spend hit £790 in June and July and £810 in August, representing a Y/Y jump of over 14% for the three months and the highest level in over two years. This shows that consumers have boosted their reliance on credit rather than disposable income as heightened inflation squeezes their purchasing power.
An increase in the average balance for accounts with one and two missed payments continued in June and July, though it halted in August.
Cash sales on cards climbed 6.7% in June and 3.4% in July, another concerning trend for lenders as the interest charged for cash on credit cards is always higher than standard purchases, FICO pointed out.
Furthermore, "there is also evidence that the percentage of cardholders spending over their credit limit has been slowly trending upwards since March," the company said. "This could be another signal that some cardholders are over-indebted."
In the U.S., credit card metrics further normalize in August as loan growth stays strong .
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FICO sees red flag for lenders as U.K. credit card data shows inconsistent consumer trends