November 18, 2020

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Analysis of the Credit Card Market in the UK

4 min read

An Analysis of the Credit Card Market in the UK

The use of a credit card has been on the rise over the past few years. In the UK, this trend is even more dominating in the context of the UK. It is one of the lucrative markets for financial institutions, though not as large as the US, but a significant population is using credit cards and thus a deeper penetration.

Also, the total number of credit cards in the UK is higher than his North American counterpart. We all need a credit card, especially the millennial population and it’s one of the most significant gifts to the millennials of the UK who love spending freely on gadgets and tech devices.

People in the UK take debt consolidation loans from direct lenders when their credit card bills pile up and due to be paid. These direct lenders give short-term loans to borrowers to meet their financing needs. These loans are specifically for bad credit borrowers, and he does not have to pledge any asset as collateral against the loan. No guarantor is needed, and you can sit with the lender and chalk out a repayment plan based on your cash flows.

An Overview

Credit cards these days are accepted almost everywhere in the UK and can be used to pay bills, buying groceries, paying fuel bills, doing shopping, even withdrawing money. A credit limit is assigned initially by the credit card issuer, and the card user can only transact up to that limit. This credit limit is decided by the credit card issuing authority based on the income of the cardholder and his current liabilities.

Then, the cardholder will have to repay the amount he borrowed or spend by swiping his credit card. He can choose to repay the complete amount or pay the billing amount only from the total amount and carrying the remaining to the next month. The card issuing authority also charges a hefty interest if the borrower fails to repay the billing amount by the last date.

A Comparative Analysis

Credit cards are more convenient than private loans, and thus people in the UK prefer them overtaking small loans.

Going by the official statistics published by the UK Cards Association, the total number of adults having a credit card is 33 million in the year 2017. And, there are approximately 60 million credit cards in circulation in the UK, which means on average, a cardholder has roughly two credit cards. This is unlike the US, where one person has only a single credit card.

The penetration rate in the UK is approximately 62%, while in the US, this number is 80%. It means that 62% of the adult population in the UK own a credit card, and approximately 80% of the Americans use a credit card. This figure has risen significantly as there are now over 36 million credit cardholders in the UK with an average transaction value of 48 pounds.

Also, the interest rates on credit cards have always been higher in the UK when compared to the US. The interest rates in the UK are typically in the 20-25% range while in the US, it is somewhere between 15-17%.

If there is the widespread use of credit cards, then there must be some occurrences of financial fraud as well. According to a report by the UK Finance Department, unauthorized financial frauds reached to the tune of £845 million in 2018, which is an increase of 17% over the previous year.

A survey was done on 2000 UK adults by comparethemarket.com. It gave a statistic according to which one in every five people in the survey have been defrauded in 2018 using their credit cards. Clearly, the number of cybercrimes is also increasing along with the rise in the number of credit cards in the country.

The Concluding Discussion

When we speak of credit debt in the UK, the average credit card debt according to money.co.uk research stood at £3000 as of January this year.

In February 2020, the total credit card debt in the country was about £73 billion, which reduced by another £4 billion after the onset of the current pandemic. It clearly means that the Brits were paying off their credit card dues instead of swiping it frequently in such an unprecedented crisis of this scale. This value is expected to increase further as the UK is coming out of strict lockdown, and markets are opening up.

Also, the festive season of Christmas and New Year is around the corner. This time people will spend as they have never before as everyone was compelled to stay indoors for many months after the lockdown was imposed and lifted gradually in a phased manner.   

Description: This blog speaks some light by doing an analysis of the credit card industry in the UK, how it is growing, and what are some of the trends to watch out for.

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