Card activity fell in June despite reopening of shops

Spending on credit and debit cards in the UK fell in June despite the reopening of shops following the coronavirus lockdown.

Transactions dropped 2.7% compared to May, and were down 43.1% year-on-year, according to figures from Finance UK, which represents the banking and finance industry.

But consumers continued to spend online, with online card spending accounting for 22% of transactions for the month, compared to 14% in 2019.

June also saw credit card balances decline, dropping by 13.4% year-on-year, suggesting customers used the coronavirus lockdown to pay off credit card bills.

“Despite non-essential shops re-opening in England in mid-June, there was actually a drop in the number of card transactions in the UK compared to the previous month. Lower spending and maintained repayment levels suggest that customers may have used the opportunity to pay down their credit card bills and reduce any debts,” said Eric Leenders, managing director of personal finance, UK Finance.

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The use of contactless cards also continued with more than 55% of all payments in June being contactless, an increase of 13% on June 2019.

“As shops encouraged customers to pay by contactless card coupled with the contactless limit increase to £45, contactless transactions totalled £6.5bn ($8.4bn) in June, a 15.5% increase on May and above the level seen a year ago,” added Leenders.

Meanwhile the Financial Conduct Authority has announced plans to ensure customers struggling to pay loans due to the pandemic are supported by firms.

The proposals will cover users of credit cards, store cards, catalogue credit, personal loans, overdrafts, motor finance, buy-now pay-later, rent-to-own, pawnbroking, and high-cost short-term credit products.

READ MORE: UK cash usage declining fastest in Europe

The draft guidance published today applies to consumers who have already benefitted from payment deferrals and support with the cost of their overdrafts as well as those whose financial situation may be newly affected by coronavirus.

The proposed measures include giving customers the opportunity to repay debts without the pressure of an unreasonably short period of time and to suspend, reduce, waive or cancel interest, fees or charges to prevent a customer's balance from escalating.