UK consumers being extra cautious with credit


Credit card spending remained subdued in the run-up to Christmas, mirroring a trend that was apparent for much of 2011, according to new research.

The latest report from the Finance & Leasing Association (FLA) indicates that new consumer credit fell by 2% in November, remaining muted in the weeks heading into the festive season. credit-shy

Spending through store cards, personal loans and store instalment credit also fell, reinforcing evidence that consumers remained cautious over their finances last year.

"Once again, our figures show a fall in consumer credit spending, as consumers continue to take a cautious approach in uncertain economic times," said Fiona Hoyle, head of consumer finance at the FLA. "This reinforces the need for the government to make sure that any changes to regulation do not limit the supply of affordable, responsibly provided credit."

The FLA's findings mirror those put forward recently by financial services company Santander, which indicated a 4% reduction in annual credit card spending during the entire year.

Interestingly, the total typical number of transactions was actually shown to have risen by 1% across 2011, indicating that the amount being spent in each transaction actually fell slightly.

Santander's research pointed to the fact that households' priorities were changing throughout 2011, as holidays and luxuries became less important, with more money going towards essentials such as petrol and utilities, as well as towards smaller indulgences such as meals out.

Santander Cards managing director Callum Gibson explained that cutbacks in non-essential spending are not surprising during times of economic strife. Yet the most interesting part of his company's findings is that people are actually using their cards more often, despite a drop in total spending.

One reason for this could be the shift from using cash to cards, a trend being encouraged by new technologies designed to make payments quicker and more convenient, such as contactless 'wave and pay' systems.

See related: Consumers expect inflation to remain high in 2012; Britons have an appetite for debit

Published: 26 January 2012