UK credit card balances hit record high as payment rates decline

FICO's latest UK Credit Card Market Report for August 2025 reveals that average active credit card balances have reached a new high amid rising unemployment and reduced retail sales.

Analysis of August 2025 credit card data indicates that economic pressures are affecting how UK consumers manage their credit card commitments. According to FICO, the average active balance grew by 1.1% month-on-month, reaching GBP £1,915, which is also 4.9% higher than the same month last year. During the same period, the average percentage of the total credit card balance paid off fell to 34.3%, down 1.6% month-on-month and 6.2% year-on-year.

Consumer spending changes

The report notes that average spending in August rose to GBP £815, a 1.5% increase compared to July. However, spending remains down by 2.4% compared to August 2024. Despite the increase in spending from the previous month, elevated balance levels combined with a falling payment rate point toward growing household financial pressure.

The report observes, "After the usual seasonal dip seen in July, August saw a modest recovery in spending. Average active balances have trended significantly upward, with August seeing the strongest monthly increase since May. This continues the upward trend and remains 4.9% higher than the same time last year. One of the primary drivers behind rising balances is the accelerating downward trend in the percentage of total balance paid. August 2025 saw this drop to 34.3%."

Missed payments and delinquency trends

Analysis of missed payment categories shows mixed trends. The proportion of customers missing one payment fell by 3.5% from July, reinforcing a downward trend with a 16% year-on-year decrease, despite short-term monthly fluctuations. However, the average balance for accounts with a single missed payment increased slightly by 0.5% month-on-month to GBP £2,400, which represents an 8.7% growth from August 2024 - the sharpest increase among missed payment categories.

For accounts with two missed payments, there was a 4.2% rise in the percentage of affected customers since July, though this is 2.8% lower than last year. The average balance of these accounts also went up by 0.6% to GBP £2,895, which is 6.0% higher year-on-year.

Cases where customers missed three payments fell by 1% month-on-month and are 4.1% lower compared to August 2024. Despite this decline, these accounts hold an average balance of GBP £3,265, which is a decrease of 1.1% from July yet remains 7.4% higher year-on-year. This indicates persistently higher indebtedness for those with the most overdue payments.

Overlimit usage and cash withdrawals

Additional areas of concern highlighted by the report include overlimit account usage and cash withdrawals made on credit cards. There was a 5.8% month-on-month increase in accounts that have exceeded their credit limit, while average credit limits have remained close to GBP £5,880.

Credit card cash withdrawals increased by 1% month-on-month according to the report, further suggesting financial strain among cardholders.

Industry observations and recommendations

"Also reflecting the financial juggling act many households are currently playing, the pattern of missed payments continued to be erratic. The percentage of customers missing one payment decreased by 3.5% month-on-month, continuing the overall downward trend with a significant 16% decrease year on-year despite monthly volatility. However, the average balance for these accounts increased by 0.5% month-on-month to £2,400, now 8.7% higher than this time last year, showing the steepest year-on-year growth among missed payment categories."

The report adds, "There was a 4.2% monthly increase in the percentage of customers missing two payments, although this is 2.8% lower than the previous year, showing more stability than single-payment misses. The average balance for accounts with two missed payments rose in August 2025 by 0.6% on July to £2,895, remaining 6.0% higher than August 2024 and continuing the upward trend."

It also notes, "Customers missing three payments dropped by 1% month-on-month and is 4.1% lower than the previous year. For these accounts, the average balance fell 1.1% month-on-month to £3,265 but remains 7.4% higher than last year, indicating persistently elevated balances for the most delinquent customers."

Regarding overlimit accounts, the report says, "Another sign of financial distress is the 5.8% increase since July in overlimit accounts, although average credit limits remained virtually unchanged at £5,880."

On the implications of these trends, the report states, "The combination of accelerating balance growth, declining payment rates and increasing overlimit usage suggests heightened financial stress among cardholders. Risk teams should intensify monitoring of payment-to-balance ratios and consider implementing proactive intervention strategies for customers showing early warning signs. Given that the average balance of three missed payments is growing faster than overall balance, particular attention should be paid to credit limit management and early-stage collection strategies to prevent further balance escalation."

The data analysed for this report is based on information provided by UK card issuers using FICO's TRIAD Customer Manager solution. The figures highlight continuing financial pressures facing households and the need for close monitoring by financial institutions during a period of economic uncertainty.