Credit Card Use Fell by Half in Early Days of Lockdown

Brits charged half as much as usual on credit cards during the first weeks of lockdown, avoiding big purchases amid shop closures and financial worries.

Just £8.7 billion was spent on credit cards in April, the first full month of the lockdown, figures from UK Finance revealed. That’s half as much as was charged in April 2019 and the lowest level of spending since the Great Recession.

UK Finance, the trade body for the industry, blamed the cancellation of holiday plans and avoidance of big purchases for the downturn. Credit cards are typically used to pay for trips and big-ticket items like appliances because of the extra protection they offer against fraud, non-delivery and cancellation.

When they were making purchases on credit cards, Britons were making them online due to the closure of shops. A third of credit and debit card spending was made over the internet, the highest portion ever.

The overall rise in card spending came despite a 5.1% year-on-year decline in debit card spending. Consumers tend to favour credit cards when making online purchases. Contactless payment also saw a significant drop, as people stayed away from shops and off trains. But with the limit for contactless payments raised from £30 to £45 and many shops refusing cash, the average contactless purchase rose about £10 for the first time ever.

Eric Leenders from UK Finance said: "The Covid-19 crisis has significantly changed how, where and when people spend their money."

As consumers reined in spending, they also paid off debt, many with money they would have otherwise spent on holidays or other activities, like eating out and cinema tickets. Additionally, many holidays were also refunded onto credit cards after being cancelled. 

Consequently, outstanding balances on credit cards fell by nearly £4.7 billion over April, the largest monthly drop in a decade, UK Finance said. Those figures echo those released by the Bank of England last month which revealed that Britons paid off £7.4 billion of consumer debt, including credit cards and loans in April, the largest net repayments since records began in 1993.