Credit Card market shrinking

11th May 2010  

New research from Market Analyst Datamonitor points to the UK credit card market contracting during 2010 as just like the Government, consumers focus on reducing their spending and debt. The figures, which are derived from a wide variety of indicators, show that there will be a drop of 2.7% this year which equates to a reduction of some £3.1 billion.

This slide follows the contraction of a record £7.8 billion in 2009. Datamonitor also said that there had been a 10% fall in the number of credit cards in use, as card issuers had sought to reduce their exposure to risk and closed dormant accounts.

Outstanding balances also appear to be falling as is the value of the average credit card transaction from £64.90 in 2008 to £62 in 2009. This is expected to fall further to £60.70 in 2010

Giles Ubaghs from Datamonitor said

“This decline in transaction values is problematic for card issuers, but is not as severe as was initially feared at the beginning of 2009.

“While falling transaction values will impact credit card issuer revenues, falling balances, and hence lower exposure to risk, alongside potentially stabilising levels of write-offs mean that they should be better placed to handle this.”

It’s thought that the credit card industry won’t see a return to growth in business into well into 2011, but its not all bad news for the industry. Although there has been a decline in business over the recent financial downturn, compared to other forms of consumer credit the fall has been less steep and relatively stable. If the bewildering number of new credit card deals to compare is anything to go by, the credit card issuers confidence in the future remains strong as ever.

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