Credit card balances shrink sharply as repayments outstrip new borrowing

The amounts of money owed on credit cards evaporated at the fastest annual rate in October 2020 since the coronavirus pandemic started, according to a trade association.

UK Finance said outstanding balances on credit card accounts fell by 14.7% in the year to October 2020, as people paid back higher amounts on their plastic than the amounts they newly spent.

It marked the biggest 12-month fall since the pandemic started, UK Finance said.

Eric Leenders, managing director of personal finance, UK Finance, said: “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.”

There were 1.7 billion debit and credit card transactions in the UK in October, marking a 0.4% decline from September and 3.6% lower than in October 2019.

These transactions amounted to a total spend of £64.2 billion.

The proportion of spending made using contactless cards also fell, which UK Finance said reflected Covid-19 restrictions.

Just over four in 10 (41%) card transactions were contactless in October, compared with 44% the same month a year earlier.