Card spending falls in October

Consumer spending across debit and credit cards dropped from September to October, as additional social distancing measures were tightened.

According to data from trade body UK Finance, there were 1.7 billion debit and credit card transactions in October, 0.4 per cent less than September and 3.6 per cent lower than in October 2019.

These transactions amounted to a total spend of £64.2bn, which was 2.5 per cent less than the previous month, but 4.9 per cent higher than October 2019.

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Consumers made 687 million contactless card transactions in October, 1.9 per cent lower than in September and down 9.8 per cent year-on-year.

This came as the pandemic brought fewer opportunities for people to spend money in pubs, restaurants and on public transport, particularly with tougher social distancing guidelines.

However, the total value of contactless transactions rose to by 15.8 per cent year-on-year to reach £8.1bn in October as people had the opportunity to take advantage of the increased £45 payment limit.

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The number of transactions made by UK debit cardholders dropped by 4.6 per cent month-on-month to £1.6bn in October while the total spend fell by 9.1 per cent from September to reach £53.2bn in October.

UK Finance data also shows that outstanding balances on credit card accounts fell by 14.7 per cent in the year to October 2020.

This is the eighth successive month in which repayments have outstripped borrowing, and the largest drop over a 12-month period since the pandemic began.

This could be attributed to people choosing to pay off debt or reduced usage of credit, and the reduction of large expenditure on items such as holidays due to the continued travel restrictions.

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“October saw card spending decline in the UK as additional social distancing measures and Covid-19 restrictions were put in place across the country, reducing opportunities to spend on the high street and in pubs, bars and restaurants,” said Eric Leenders, managing director of personal finance at UK Finance.

“Spending on contactless cards also fell as regional lockdowns came into force, restricting use of contactless across retail outlets.

“However, contactless remained popular for essential transactions, with consumers being able to make use of the increased £45 payment limit.

“Outstanding balances on credit card accounts fell for the eighth month in a row, reaching the largest drop over a 12-month period since the pandemic began – indicating that more people were paying off debt, or fewer making use of credit.”

While consumers are spending less on credit cards, businesses are continuing to borrow to survive the pandemic. The latest data from the Treasury this week showed that over 1.5 million businesses have benefited from the government’s emergency loan schemes, totalling over £68bn.