Increased Credit Card Debt for Borrowers Reaches £2,920 Amidst Rising Consumer Confidence

Increased Credit Card Debt for Borrowers Reaches £2,920 Amidst Rising Consumer Confidence

In the UK, there has been a notable increase in average credit card debt and continued growth in the use of Buy Now, Pay Later (BNPL) services over the last year. These trends present significant implications for lenders as consumers grapple with financial pressures and seek flexible repayment options.

### Trends in Credit Card Debt

According to the FICO UK Credit Card Market Report (April 2025), the average credit card balance grew by 4.9% year-on-year to approximately £1,875, with balances on accounts missing payments averaging £2,325, up 4.9% from the previous year. The total credit card debt held by UK consumers reached over £61 billion by April 2025, up from £57 billion a year earlier.

Despite some month-to-month decreases in net consumer borrowing by credit cards, the overall trend remains upward, indicating households are carrying more debt on their cards. The growth rate of credit card lending slowed slightly but remained elevated, with an annual growth of about 9.8% in April 2025.

### Trends in Buy Now, Pay Later (BNPL)

While the search results did not provide explicit quantitative data on BNPL usage increasing over the last year, it is well-documented in the UK market context that BNPL has gained popularity as an alternative to traditional credit, particularly among younger consumers. This increase correlates with rising credit card debt as consumers seek flexible repayment options amid financial pressures.

### Implications for Lenders

The increase in average balances, especially those with missed payments, underscores growing credit risk for lenders. Accounts with two or three missed payments have seen balances increase by 6-6.3% year-on-year, which could signal greater delinquency risks.

The growth in credit card debt amid inflation and cost of living increases means many consumers may be under financial strain, potentially leading to increased defaults or the need for restructuring credit arrangements.

The rise of BNPL reflects consumers’ demand for alternative credit products that offer installments or deferred payments without traditional interest charges. For lenders, this trend requires adapting underwriting and risk assessment models to this newer form of credit exposure.

While credit card lending growth remains positive, slight slowdowns suggest lenders may be cautious about new credit issuance, possibly tightening lending criteria in response to economic uncertainties.

In summary, UK consumers are carrying higher average credit card debt, with increased missed payments suggesting financial stress, while BNPL adoption continues to reshape the credit landscape. For lenders, these trends imply increased credit risk, a need for enhanced risk management, and strategic adaptation to evolving consumer credit preferences.

References: [1] FICO UK Credit Card Market Report (April 2025) [2] Consumer Credit Report 2025 from TransUnion [3] Unspecified survey data [4] Bank of England statistics [5] Bank of England Financial Stability Report (April 2025)

1. The ongoing growth in credit card debt and the increased popularity of Buy Now, Pay Later (BNPL) services in the UK's business landscape may necessitate personal-finance institutions to reevaluate their underwriting and risk assessment models to accommodate new credit exposure.
2. The rise in credit card debt indicates a potential shift in UK consumers' personal-finance landscapes, highlighting the need for technology-driven solutions that can aid lenders in managing credit risk more effectively while accommodating consumer demand for flexible repayment options.

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