UK credit card use rises as debit spending softens

By Vriti Gothi

UK card spending data published by UK Finance points to diverging trends between debit and credit cards, with credit usage and balances continuing to expand even as overall spending growth remains subdued.

Across the UK and overseas, cardholders made 2.3 billion debit card transactions, representing a 1.2% increase year-on-year. Despite the rise in transaction volumes, total debit card spend fell 0.5% to £67.1 billion. The combination of higher volumes and lower aggregate spend suggests a reduction in average transaction values, indicating that consumers may be making more frequent but smaller purchases.

Credit cards, by contrast, recorded stronger momentum. There were 403 million credit card transactions, up 4.5%  compared with the same period a year earlier. Total credit card spend increased 4.4 % to £22 billion, reflecting both greater usage and higher aggregate outlays. The data underscores a continued shift towards credit as a funding mechanism for day-to-day expenditure.

Outstanding balances on credit card accounts rose 8.1% over the previous 12 months, reinforcing evidence of sustained reliance on revolving credit. However, the proportion of balances incurring interest edged down to 48.1%, from 49.4% a year earlier. While balances have grown, the marginal decline in interest-bearing debt suggests some resilience in repayment patterns, potentially reflecting consumers’ efforts to manage borrowing costs more actively.

Within the UK, total card activity — including transactions made by both domestic and overseas cardholders — reached 2.19 billion debit and credit card transactions, up 0.3%  year-on-year. However, overall spend declined by 1% to £73.3 billion, again pointing to softer expenditure levels despite stable transaction numbers.

Contactless payments remain central to the UK’s retail payments ecosystem. They accounted for 66% of all credit card transactions and 76% of all debit card transactions, underscoring their continued dominance at the point of sale. In total, 1.634 billion contactless transactions were recorded, broadly flat compared with the previous year. While volumes have stabilised, the total value of contactless payments rose 3.6% to £26.2 billion, indicating higher average spend per transaction.

A closer look at contactless usage reveals contrasting patterns across card types. Contactless credit card transactions increased 7.8% year-on-year, while contactless debit card transactions declined 1.5%. The divergence mirrors the broader shift in consumer payment behaviour, with credit cards capturing a larger share of incremental spending.

For the FinTech and payments sector, the data highlights several structural themes. First, contactless has firmly established itself as the default method for in-store transactions, suggesting limited headroom for further volume-driven growth. Future gains in this segment are likely to depend more on value-added services, tokenisation within digital wallets, and integration with loyalty and instalment-based credit offerings.

Second, the sustained rise in credit card balances places renewed focus on consumer credit risk and affordability monitoring. FinTech lenders, card issuers and embedded finance providers will need to balance growth ambitions with prudent underwriting and enhanced data analytics to manage portfolio performance in a moderating spending environment.

Finally, the divergence between debit and credit growth underscores the evolving role of payment instruments in household cash-flow management. Debit cards continue to dominate in terms of overall transaction volumes, but credit cards are gaining traction as consumers seek flexibility. For market participants, this dynamic reinforces the strategic importance of diversified product portfolios, digital-first servicing models and real-time data capabilities.

Overall, the figures suggest a payments landscape that remains resilient in terms of activity but is experiencing a recalibration in spending patterns, with credit playing an increasingly prominent role.