UK Finance: Card spending fell in October as Covid-19 restrictions tightened

Tuesday, 19 January 2021 10:13

The volume and value of card transactions fell in October compared to the previous month, as tougher Covid-19 measures were introduced. The number of contactless transactions decreased as people’s spending behaviour changed due to social distancing restrictions, however the value of contactless transactions rose by 15.8 per cent compared to the previous year, as consumers had the opportunity to take advantage of the increased £45 payment limit....Request free trial

The volume and value of card transactions fell in October compared to the previous month, as tougher Covid-19 measures were introduced.
The number of contactless transactions decreased as people’s spending behaviour changed due to social distancing restrictions, however the value of contactless transactions rose by 15.8 per cent compared to the previous year, as consumers had the opportunity to take advantage of the increased £45 payment limit.
Balances outstanding on credit cards contracted by 14.7 per cent over the year to October, the largest annual contraction since the pandemic began.

Data published today by UK Finance reveals that spending across debit and credit cards fell in October 2020 compared to the previous month, as additional social distancing measures were introduced across the UK.

There were 1.7 billion debit and credit card transactions in the UK in October, a 0.4 per cent decline from September and 3.6 per cent lower than in October 2019. These transactions amounted to a total spend of £64.2 billion, which was 2.5 per cent less than the previous month, but 4.9 per cent higher than October 2019.

The proportion of spending made using contactless cards also fell, as Covid-19 restrictions provided fewer opportunities for people to spend money in pubs, restaurants and on public transport. Over four in ten (41 per cent) card transactions were contactless in October, compared to 44 per cent the same month the previous year. There was a total of 687 million contactless card transactions in October, 1.9 per cent lower than in September and 9.8 per cent lower than October 2019. However, the total value of contactless transactions, at £8.1 billion, was 15.8 per cent higher than October 2019 as people had the opportunity to take advantage of the increased £45 payment limit.

The number of transactions made by UK debit cardholders fell 4.6 per cent compared to the previous month to 1.6 billion, which was also 3.5 per cent lower than October 2019. The total spend of £53.2 billion was 9.1 per cent lower than in September and 0.2 per cent less than the same month in 2019.

UK Finance data also shows that outstanding balances on credit card accounts fell by 14.7 per cent in the year to October 2020. This is the eighth successive month in which repayments have outstripped borrowing, and the largest drop over a twelve-month period since the pandemic began. This could be attributed to people choosing to pay off debt or reduced usage of credit, and the reduction of large expenditure on items such as holidays due to the continued travel restrictions.

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

“October saw card spending decline in the UK as additional social distancing measures and Covid-19 restrictions were put in place across the country, reducing opportunities to spend on the high street and in pubs, bars and restaurants. Spending on contactless cards also fell as regional lockdowns came into force, restricting use of contactless across retail outlets. However, contactless remained popular for essential transactions, with consumers being able to make use of the increased £45 payment limit.

“Outstanding balances on credit card accounts fell for the eighth month in a row, reaching the largest drop over a twelve-month period since the pandemic began - indicating that more people were paying off debt, or fewer making use of credit.”

Notes to editors

1. UK Finance is the collective voice for the banking and finance industry. Representing more than 250 firms across the industry, we act to enhance competitiveness, support customers and facilitate innovation.

2. Full data tables are available here.

3. The banking and finance industry has put in place a clear plan to help Britain through:

2.7 million mortgage payment deferrals
27 million interest-free overdrafts offered, 1.18 million payment deferrals on credit cards and 828,000 payment deferrals on personal loans
Over £68 billion of lending to more than 1.5 million businesses through government Covid-19 lending schemes
Protecting customers from scams and fraud
Higher limit for contactless payments

4. Please note that data on UK cardholders is different to data on card activity in the UK. Data on UK cardholders refers to transactions made either inside the UK or overseas on cards issued to UK residents and reported by card issuers. Data on card activity in the UK refers to transactions made in the UK only, both on UK-issued cards and cards issued overseas, this data is provided by acquirers.

5. A summary of our annual UK Payment Markets 2020 Report containing detailed analysis of the use of all types of payments in the UK, can be found here.

6. The quarterly Household Finance Review containing analysis and economic commentary on household finance in the UK, can be found here.

7. The monthly credit card data has been re-stated back to January 2019 to increase our market coverage to 97 per cent providing a more representative picture of the credit card market.