Tag Archive for: cost of living crisis
(London, UK): Consumer expectations for future financial stability is worsening, with many looking to credit cards for support during the cost-of-living crisis. According to Auriemma Group’s latest issue of Cardbeat UK, 37% of cardholders believe their financial health will worsen in the next 6 months.
Gen Z and younger Millennials express greater optimism about their future financial health than their older counterparts despite increased levels of borrowing. Auriemma’s research found that 20% of cardholders are borrowing more to afford everything they need, rising to 32% among Gen Z and Millennials, and 33% of sub- and near-prime customers. The added strain of rising costs will likely cause these figures grow in the coming months.
“Since the start of the pandemic we have seen a resurgence in consumer spending on debit cards and a rise in transfers from savings to current accounts,” says Jaclyn Holmes, Director of Auriemma Research. “Today it appears rising inflation is furthering the strain on consumers, leading some to rely on their credit cards for essential spending.”
According to Auriemma’s latest findings, over 90% of credit cardholders anticipate rising costs of food, housing, fuel or energy bills to impact their personal finances negatively over the next 12 months. While energy prices were capped at £2,500 for 2 years beginning this month, some households may still see their bills double.
“At a time when all other costs are skyrocketing, the price cap will offer little comfort for many households,” says Holmes. “With more monthly outgoings attributed to energy bills, the pressure on credit card usage and borrowing will likely be even higher.”
But consumers aren’t the only ones bracing for impact. Issuers are also trying to assess how the cost-of-living crisis is currently impacting their cardholders and anticipate the enduring impact moving forward.
“Lenders have already begun seeing the operational impact of this change in customer behaviour,” says Louis Stevens, Director of Auriemma’s Industry Roundtables. “This comes at a time where regulatory initiatives, such as The Consumer Duty Act, are already taking up considerable time and resources.”
As issuers likely tighten risk criteria for customers seeking credit, some may turn to Prime and affluent customers for lower-risk lending opportunities. Auriemma Group will continue to monitor this space closely in upcoming Cardbeat studies and within its Customer Service Roundtable groups.
Survey Methodology
This Auriemma Research study was conducted online within the UK by an independent field service provider on behalf of Auriemma from April-May 2022, among 80o+ adult credit cardholders. The number of interviews completed on a monthly basis is sufficient to allow for statistical significance testing between sub-groups at the 95% confidence level ± 5%, unless otherwise noted. The purpose of the research was not disclosed nor did the respondents know the criteria for qualification.
About Auriemma Group
For more than 35 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognised experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximise their performance. Auriemma serves the consumer financial services ecosystem from our offices in London and New York City. For more information, visit us at www.auriemma.group or call Jaclyn Holmes at +44 (0) 207 629 0075.
(London, UK): Rising costs for fuel, energy, food shops and housing are already impacting consumers around the UK, but many believe this is only the beginning. According to Auriemma Group’s latest issue of Cardbeat UK, 73% of credit cardholders expect the rising cost of living to have a negative impact on their personal finances over the next 12 months.
Others factors will further impact consumers, including the Bank of England’s forthcoming increased interest rates. Coupled with rises in the cost of living, these elements are set to put considerable strain on some UK cardholders.
“Rate increases will create added pressure on homeowners across the UK at a time of significant financial uncertainty,” says Jaclyn Holmes, Director of Research at Auriemma. “Meanwhile the volatility of the rental market is already putting a strain on those who do not own their own home.”
The rising costs of food, energy and fuel have impacted over eight-in-ten credit cardholders, and rising housing costs have impacted about six-in-ten. Auriemma’s research found that rising housing costs were of particular impact to Millennials, who more commonly rent—a cost that has increased 9.5% on average since 2021 according to the latest HomeLet Rental Index.
“These indicators are a sign that banks and lenders must ready themselves to provide additional support to struggling customers,” says Holmes. “When rising costs become insurmountable it often leads to cardholders making spending cuts, missing payments or even becoming delinquent.”
In fact, 67% of credit cardholders agree that they are already spending less on non-essential or luxury items due to the state of their finances. And four-in-ten say they are unable to afford a holiday, a figure that increases to 57% among sub-prime and near-prime customers.
“These changes in spending habits could have an impact on the retail, entertainment and travel sectors,” says Holmes. “This could be a considerable blow after such a short period of recovery following the start of the pandemic.”
Looking ahead, the cost of living crisis will have a notable impact on consumers. Auriemma’s research shows one-fifth of cardholders are already borrowing more to afford everything they need, and as prices increase Auriemma anticipates this figure to rise. Auriemma Group will continue to monitor this space closely in upcoming Cardbeat studies and within its Card Customer Service and Complaints roundtable.
Survey Methodology
This Auriemma Research study was conducted online within the UK by an independent field service provider on behalf of Auriemma in April 2022, among 80o+ adult credit cardholders. The number of interviews completed on a monthly basis is sufficient to allow for statistical significance testing between sub-groups at the 95% confidence level ± 5%, unless otherwise noted. The purpose of the research was not disclosed nor did the respondents know the criteria for qualification.
About Auriemma Group
For more than 35 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognised experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximise their performance. Auriemma serves the consumer financial services ecosystem from our offices in London and New York City. For more information, visit us at www.auriemma.group or call Jaclyn Holmes at +44 (0) 207 629 0075.