Gross credit card lending increased by 8% to reach £150 billion in 2013, while net credit card lending more than doubled reaching £2.6 billion. This highlights the change in consumers’ attitudes towards both spending and borrowing. After a long focus on paying off their credit card debts, the sizeable growth in 2013 shows that consumers are feeling more confident about taking on new debt again.

Although within the last decade the number of credit card transactions increased by 15% to reach 2.3 billion in 2013, they are still used much less frequently than debit cards. In order to bridge this gap, credit cards need to make more of their reward schemes. There is scope both to increase communication with their customer base and to encourage more frequent credit card use. Improved smartphone applications from providers can also help keep cardholders continually engaged with their credit card offerings.

This report examines the credit card market, with analysis covering regulatory changes and market developments, highlighting trends and future growth prospects. Drawing on a range of information sources, it provides a comprehensive overview of how the market is evolving, as well as recent provider activity, and identifies where opportunities for growth may exist. It also explores consumer behaviour with regards to how they use credit cards, as well as their attitudes towards reward schemes, by analysing the results of Mintel’s independently commissioned online consumer survey.

Report scope and product definitions

There are various types of payment cards available to UK consumers. The focus of this report is on credit and charge cards, even though reference is made to other plastic cards including debit cards.

Credit card: is a type of plastic payment card which allows the cardholder to pay for goods and services on credit, up to an agreed limit. It offers an added advantage over paying by debit card in that purchases over £100 (and up to £30,000) are covered under Section 75 of the Consumer Credit Act which hold the credit card provider liable in case there are any issues with the product itself or the supplier. Credit cards can also be used for cash acquisition, although there is usually an additional fee for ATM withdrawals. 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 (usually the higher of £25 or 1% of the balance, plus any interest owed). It is also fairly common for credit cards to come with extra features and services, such as cashback on purchases, and some are attached to a reward or loyalty scheme.

Charge card: is similar to 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 and most charge cards are attached to a reward scheme.

Debit card: is a type of plastic card which allows customers access to their bank account. Cardholders can withdraw cash from an ATM as well as pay electronically for goods and services at merchant locations.

Prepaid card: is a payment card which can be preloaded with a set amount of money, allowing the cardholder to make purchases using these funds. This card essentially functions like a gift card as the cardholder can never spend more money than is already loaded onto the card.

Abbreviations

APR Annual Percentage Rate
ATM Automated Teller Machine
BoE Bank of England
CHAPS Clearing House Automated Payment System
EU European Union
FCA Financial Conduct Authority
GDP Gross Domestic Product
HMRC Her Majesty’s Revenue and Customs
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