UK credit card loyalty wanes amid high interest rates

UK consumers are showing a decline in loyalty to credit cards as high interest rates continue to pose financial challenges, according to Marqeta's latest State of Credit Report.

The report, which surveyed 1,000 UK consumers, highlights increased difficulties with credit card debt, with many experiencing these challenges for the first time. Specifically, the data reveals that 30% of UK consumers have more debt now than they did a year ago. Additionally, 74% have encountered difficulties in meeting monthly payments within the last year.

A particularly concerning finding is that 13% of respondents missed a credit card payment in the past 12 months. Of those, 66% had never missed a payment before. Marcin Glogowski, SVP, Managing Director Europe and UK CEO at Marqeta, commented, "High interest rates are creating significant challenges for consumers who rely on credit for financial stability."

Alongside these challenges, the research points to shifting attitudes towards credit card benefits. Nearly half (48%) of the respondents confirmed that their credit cards do not currently offer rewards, loyalty points, or any benefits. In contrast, 43% of those using multiple credit cards indicated they would use a card more frequently if better rewards were available.

The use of credit cards affiliated with retailers is rising, with 30% of surveyed consumers owning such a card, marking a 25% increase in just 12 months. This trend reflects a growing preference for embedded finance and personalized credit solutions among consumers.

Consumer interest in new financial services, such as Buy Now Pay Later (BNPL), is also transforming the credit landscape. Sixty-three percent of UK BNPL users reported that the service helped them manage their finances over the past year, with the figure rising to 70% among those aged 44-59.

The survey further illustrates a shift in consumer behaviour amid a competitive financial services landscape. Nearly half of millennials surveyed intend to apply for a credit card in the upcoming year, drawn by offers such as significant cashback rewards and zero interest for initial months.

Commenting on these developments, Marcin Glogowski stated, "Financial services companies need to reinvent their approach to reflect the highly personalised, flexible financial experiences that consumers are now demanding." He emphasised the need for substantial technological investment to accommodate market trends and provide tailored solutions.

Overall, the report underscores the impact of high interest rates on consumer credit experiences in the UK. The average annual percentage rate (APR) on credit cards surged from 31.8% to 35.5% over a 12-month period, contributing to the financial pressure faced by many consumers.

Marcin Glogowski noted, "Banks have done a very good job at monetising loans and credit, but by managing risk so effectively, the system has catered to wealthier people who have more assets." He continued, "As the trend towards instant, digital, flexible, personalised payments accelerates, this will become a necessity to keep up with consumer demand."