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Credit Card Trends
CREDIT CARD SPENDING TO RISE BY 8% IN 2014
Credit card spending
UK retail spending using credit cards fell by -7% from £77 billion to £72 billion at the height of recession between 2008 and 2010. Credit card spending is now starting to rise and the Centre for Retail Research, sponsored by TotallyMoney.com, is researching the recovery in plastic.
In 2013 consumer spending using credit cards increased by £4.5 billion over 2012 with each individual using their cards to spend an average of £2,482 over the 12 month period. A new study reveals that this trend looks set to continue over the next 12 months.
We expect overall credit card spending in 2014 by UK consumers to hit over £86 billion, an 8% increase on the £80 billion spent on credit cards in 2013. In line with this, UK consumers will also carry out an additional 54 million retail transactions on credit cards.
Debit card spending
Despite the continued resurgence in credit card spending it is clear that debit cards still win the day in 2014. Spending on debit cards has increased by 45% from 2007 to 2014, compared to just an 11% increase in credit card usage.
Outside the realm of plastic more traditional methods of payments still remain relevant if diminishingly so. There is a projected 1% year on year decline in cash use in 2014 and nearly a 5% decline in the use of cheques (mainly smaller retailers).
The Credit in Credit Cards
Our study also predicts that total retail spend will increase by 3.4% at current prices over the next 12 months with overall payments totalling £331 billion. Over a quarter of this (26%) is expected to be spent on credit - the highest proportion since 2008.
We expect more to be spent on homes and holidays. Because more people are now moving house, we expect spending on DIY, furniture, wall and floor coverings (and house security) to rise. Holidays should benefit as well.
Consumers are expected to carry out 2.5 billion credit card transactions in 2014, a 2% increase on 2013. The average spend per transaction is also expected to rise from £32.50 to £34.20. Overall, individual spend is forecast to reach £2,892 in 2014, 8% higher than last year.
Consumer confidence rose dramatically in 2013. Economic news now is mostly good, with GDP growth almost at pre-recession levels, inflation down to 2%, unemployment at 7.1% and a predicted rise in property prices should mean that consumer confidence will continue to improve throughout 2014.
This increased confidence however may not be entirely justified. Just under a third (30%) of total credit card spend is actually carried out on everyday essentials such as groceries and other food (alongside alcohol). This could be a sign that people are struggling to make ends meet. In fact UK consumers are racking up a total bill of £25.7 billion and for the 11% who only make the minimum repayment each month, spending so much on cards that they can't pay off could end up being very costly.
On the other hand, the 59% of credit card holders who pay off their bill in full every month will likely be enjoying the benefits of reward and cashback credit cards.
Holidays on credit
More consumers will use credit cards to pay for holidaying abroad in 2014. In addition to their retail spend, travellers will spend almost £9 billion on their credit cards in 2014, booking overseas trips and spending when they get there. This represents a projected 8% increase in overseas holiday spending in 2014 over and above the £8.3 billion that was spent last year.
But if those who spend make only the minimum repayment each month, they could still be paying for a £1,000 holiday in 2039, unless they avoid the interest payments by switching into the next 0% deal.