The proportion of 18-24 year olds with a credit card has fallen from 55% in 2017 to 43% in 2020. As young people increasingly turn their backs on credit cards it is important to rethink how they fit into the modern shopping experience. 49% of 18-34 year old credit card holders don’t consider a physical card an essential feature of a credit card. This highlights how technology is increasingly blurring the divide between credit cards and other forms of credit.

To appeal to young people credit cards need to be more digitally based and provide apps that enhance the entire shopping experience. They should also seek to encourage word-of-mouth recommendations by creating digital communities of like-minded consumers or offering referral bonuses.

COVID-19 led to a sharp fall in outstanding consumer credit during the height of lockdown. As the economy started to reopen, consumers remained concerned about returning to debt and cautious about spending, especially for big-ticket items, leading to a slow recovery in credit card lending.

Longer term, many consumers remain deeply conscious of the economic challenges that remain ahead, while many who had been happy to build up credit card debt prior to the pandemic are now reassessing how sustainable that debt really is.

Key issues covered in this Report

  • How the economic fallout of COVID-19 will affect consumer attitudes towards credit cards and the opportunities and threats this presents.

  • How credit card companies are seeking to innovate to reach new customers and see off the threat from other types of credit.

  • Demographic analysis of credit card ownership and use.

  • An assessment of the important features of a credit card, including how this varies by demographic group.

  • The sources of information that consumers trust most to advise them on the most suitable credit card for their needs.

COVID-19: Market context

The first COVID-19 cases were confirmed in the UK at the end of January, with a small number of cases in February. The government focused on the ‘contain’ stage of its strategy, with the country continuing to operate much as normal. As the case level rose, the government ordered the closure of non-essential stores on 20 March.

A wider lockdown requiring people to stay at home except for essential shopping, exercise and work ‘if absolutely necessary’ followed on 23 March. Initially, a three-week timeframe was put on the measures, which was extended in mid-April for another three weeks.

The Health Protections Regulations 2020 came into effect on 15 June, allowing the reopening of all non-essential stores in England as well as the mandatory use of face coverings on public transport. Pubs, restaurants, hotels and hairdressers were able to reopen on 4 July, with many beauty businesses following on 13 July.

From 24 July, it became mandatory to wear face coverings in shops and supermarkets. Rules on travel remain fluid: from 10 July, travellers from more than 50 ‘low-risk’ countries no longer had to self-isolate for 14 days.

In September the infection rate started to rise and local lockdowns started to come into force across the country. On 22 September the ‘rule of six’ was introduced in England limiting groups to six people. Similar, albeit slightly different, rules apply in Scotland, Wales and Northern Ireland.

Economic and other assumptions

Mintel’s economic assumptions are based on the Office for Budget Responsibility’s central scenario included in its July 2020 Fiscal Sustainability Report. The scenario suggests that UK GDP could fall by 12.4% in 2020, recovering by 8.7% in 2021, and that unemployment will reach 11.9% by the end of 2020, falling to 8.8% by the end of 2021.

The current uncertainty means that there is wide variation on the range of forecasts, however, and this is reflected in the OBR’s own scenarios. In its upside scenario, economic activity returns to pre-COVID-19 levels by Q1 2021. Its more negative scenario, by contrast, would mean that GDP doesn’t recover until Q3 2024.

The current (September 2020) rise in infections and tightening of restrictions means the UK is increasingly likely to follow the downside scenario explained above, although there continues to be widespread uncertainty about how bad the second wave will prove or when (and if) a vaccine will become available.

Products covered in this Report

For the purposes of this Report, Mintel uses the following definitions:

Credit card – a plastic payment card allowing the cardholder to pay for goods and services with access to a pre-agreed credit facility. Purchases between £100 and £30,000 are covered under Section 75 of the Consumer Credit Act providing additional consumer protection. It can also be used for cash acquisition, although there is usually an additional fee for cash transfer or ATM withdrawal.

The credit facility allows the cardholder to have a revolving balance, which can be paid off over a period of time. There is typically an interest-free period of up to 56 days from the date of purchase, after which time interest will be charged on any outstanding balance. If balances are not repaid in full, the cardholder will be required to make a minimum monthly payment.

It is common for credit cards to come with extra features and services, such as cashback on purchases and no transaction fees on overseas spending. Some are also attached to a reward or loyalty scheme – although this is more common at the premium or fee-paying end of the market.

Charge card – like a credit card except the balance must be paid off in full at the end of each billing cycle. Fees are imposed if this requirement is not met. Some charge cards do not impose a credit limit, giving the cardholder a limitless amount of credit. Most charge cards incur an annual fee, in exchange for which the cardholder can benefit from a reward scheme.

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