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Credit Cards - UK - August 2016

“Consumers are price sensitive when it comes to credit cards, attracted by the best reward schemes and longer interest-free periods. However, cards that offer longer-term value are more likely to guarantee customer loyalty. Mintel’s consumer research shows that two in five consumers think that the interest rate is the most important factor when looking for a credit card.”

– Jessica Galletley, Financial Services Analyst

This report looks at the following areas:

  • Doing more to help ‘minimum repayers’ avoid difficulties
  • Virtual cards will change credit-spending habits
  • Credit card market sees low levels of switching

This Report examines the credit card market and key developments and drivers of the market. It includes analysis of major providers and their competitive strategies. This Report explores consumer ownership of payment cards, as well as levels of credit card debt and intentions towards future use of credit cards. It will also explore their likelihood to switch providers and borrowing intentions over the next 12 months. It also looks at the key features people look for when choosing a credit card and how these needs are met by different types of providers.

For the purposes of this Report, Mintel has used the following definitions:

Credit card – is a 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 74 of the Consumer Credit Act. It 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 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 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 are attached to a reward scheme.

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Table of contents

  1. Overview

    • What you need to know
      • Products covered in this Report
      • Executive Summary

          • The market
            • Market growth expected to slow in 2016
              • Figure 1: Forecast of gross credit card lending (non-seasonally adjusted) – Fan chart, 2011-21
            • Number of credit cards in issue grows by 4%
              • Figure 2: Number of debit, credit and charge cards in issue, 2001-15
            • Volume of credit card transactions up by 12%
              • Companies and brands
                • Barclaycard dominates credit card market…
                  • Figure 3: Estimated volume share of UK credit and charge card market, May 2015
                • Disparity among credit card providers
                  • Figure 4: Attitudes towards and usage of selected brands, May 2016
                • The consumer
                  • Nearly two thirds of adults own a credit card
                    • Figure 5: Ownership of credit and other payment cards, May 2016
                  • Nearly half have no outstanding balance on their credit cards
                    • Figure 6: Level of credit card debt, May 2016
                  • Majority are unlikely to switch
                    • Figure 7: Likelihood to switch credit card provider, May 2016
                  • No fees are important when choosing a provider
                    • Figure 8: Most important features when choosing a credit card, May 2016
                  • Credit card market lacks loyalty
                    • Figure 9: Credit card user future behaviour, May 2016
                  • What we think
                  • Issues and Insights

                    • Doing more to help ‘minimum repayers’ avoid difficulties
                      • The facts
                        • The implications
                          • Virtual cards will change credit-spending habits
                            • The facts
                              • The implications
                                • Credit card market sees low levels of switching
                                  • The facts
                                    • The implications
                                    • The Market – What You Need to Know

                                      • Growth expected to slow in 2016
                                        • Market to reach £241 billion by 2021
                                          • Number of credit cards in issue grows by 4%
                                            • ‘Other consumer credit’ growth outstripping credit cards
                                              • Credit card competition working well according to market study
                                              • Market Size and Forecast

                                                • Market growth expected to slow in 2016
                                                    • Figure 10: Gross and net credit card lending (non-seasonally adjusted), 2011-16
                                                  • Credit card market expected to reach £241 billion by 2021
                                                    • Figure 11: Forecast of gross credit card lending (non-seasonally adjusted) – Fan chart, 2011-21
                                                    • Figure 12: Forecast of gross credit card lending, 2011-21
                                                  • Forecast methodology
                                                  • Size of the Payment Card Market

                                                    • Number of credit cards in issue grows by 4%
                                                      • Figure 13: Number of debit, credit and charge cards in issue, 2001-15
                                                    • Share of cash payments falls dramatically
                                                      • Figure 14: Share of consumer payment volumes, 2015
                                                  • Card Spending Patterns

                                                    • Volume of credit card transactions up by 12%
                                                      • Figure 15: Volume and value of credit and debit card purchase transactions, 2011-15`
                                                    • Average purchase value falls by 5%
                                                    • Market Drivers

                                                      • ‘Other consumer credit’ growth outstripping credit cards
                                                        • Figure 16: Gross consumer credit lending (excluding student loans), 2009-15
                                                      • Credit card rates remain steady
                                                        • Figure 17: UK interest rates, January 2009-May 2016
                                                      • Decline in write-offs for credit cards stalls
                                                        • Figure 18: Value of write-offs to loans to individuals, 2010-15 (not seasonally adjusted)
                                                      • Financial well-being falters following Brexit vote
                                                        • Figure 19: The financial well-being index, January 2009-July 2016
                                                      • Value of fraud losses continues to rise
                                                        • Figure 20: Annual plastic fraud losses on UK-issued cards, 2008-15
                                                    • Regulatory and Legislative Changes

                                                      • Interchange fees ruling has little impact on cost of borrowing
                                                        • Credit card competition working well according to FCA market study
                                                          • Consumer Credit Act Review
                                                          • Companies and Brands – What You Need to Know

                                                            • Barclaycard dominates credit card market
                                                              • Interest-free periods get longer…
                                                                • Credit card adspend falls by 12%
                                                                  • Wide disparity in consumer trust of brands
                                                                  • Market Share

                                                                    • Barclaycard dominates the credit card market…
                                                                      • Figure 21: Credit card market share, by proportion of consumers who have cards with selected brands, May 2016
                                                                    • …but the combined force of LBG means it shares the top spot
                                                                      • Figure 22: Estimated volume share of UK credit and charge card market, May 2016
                                                                  • Competitive Strategies

                                                                    • Cashback and reward schemes continue to attract customers…
                                                                      • Retailers and supermarket banks
                                                                        • Over-50s reward cards
                                                                          • ‘Incumbent challengers’
                                                                            • …but changes to interchange rules leads to a re-think on rewards
                                                                              • Interest-free periods get longer…
                                                                                • Virgin Money
                                                                                  • Subprime credit card market sees growth
                                                                                    • Credit card providers embrace contactless payment technology
                                                                                      • Plastic cards will be replaced by contactless
                                                                                        • Barclays
                                                                                          • MasterCard
                                                                                            • MBNA launches loan-alternative credit card
                                                                                              • Paid-for current accounts pose a threat to reward-based cards
                                                                                              • Advertising and Marketing Activity

                                                                                                • Credit card spend falls by 12%
                                                                                                  • Figure 23: Total above-the-line, online display and direct mail advertising expenditure on plastic cards, 2013/14-2015/16
                                                                                                • Direct mail continues to attract the highest amount of spend
                                                                                                  • Figure 24: Total above-the-line, online display and direct mail advertising expenditure on credit and charge cards, by media type, 2013/14-2015/16
                                                                                                • Barclaycard accounts for over a third of all spend
                                                                                                  • Figure 25: Total above-the-line, online display and direct mail advertising expenditure on credit and charge cards, by advertiser, 2013/14-2015/16
                                                                                                • Credit card providers embrace digital channels
                                                                                                  • Figure 26: Number of twitter followers, by credit card provider, July 2016
                                                                                                • Nielsen Ad Intel coverage
                                                                                                • Brand Research

                                                                                                    • What you need to know
                                                                                                      • Brand map
                                                                                                        • Figure 27: Attitudes towards and usage of selected brands, May 2016
                                                                                                      • Key brand metrics
                                                                                                        • Figure 28: Key metrics for selected brands, May 2016
                                                                                                      • Brand attitudes: Sainsbury’s Bank best at rewarding loyalty
                                                                                                        • Figure 29: Attitudes, by brand, May 2016
                                                                                                      • Brand personality: American Express differentiated by its exclusivity
                                                                                                        • Figure 30: Brand personality – Macro image, May 2016
                                                                                                      • Monoliners need to improve their brand image
                                                                                                        • Figure 31: Brand personality – Micro image, May 2016
                                                                                                      • Brand analysis
                                                                                                        • High-street banks benefit from having strong brands with high consumer trust
                                                                                                          • American Express stands apart from all other brands
                                                                                                            • Other credit card specialists struggle to differentiate their brand image
                                                                                                              • Supermarket banks best at using credit cards to reward loyalty
                                                                                                              • The Consumer – What You Need to Know

                                                                                                                • Nearly two thirds of adults own a credit card
                                                                                                                  • Nearly half have no outstanding balance of their credit card
                                                                                                                    • Majority are unlikely to switch
                                                                                                                      • No fees are important when choosing a provider
                                                                                                                      • Payment Card Ownership

                                                                                                                        • Nearly two thirds of adults own a credit card
                                                                                                                          • Figure 32: Ownership of credit and other payment cards, May 2016
                                                                                                                        • Increase in credit card ownership
                                                                                                                          • Figure 33: Trend in credit card ownership, 2012-16
                                                                                                                        • Card ownership highest among 65+-year-olds
                                                                                                                          • Figure 34: Credit card ownership, by age, May 2016
                                                                                                                      • Level of Credit Card Debt

                                                                                                                        • Nearly half have no outstanding balance
                                                                                                                          • Figure 35: Level of credit card debt, May 2016
                                                                                                                        • Credit card balances vary across age groups
                                                                                                                          • Figure 36: Level of credit card debt, by age, May 2016
                                                                                                                      • Likelihood to Switch Providers

                                                                                                                        • Majority are unlikely to switch
                                                                                                                          • Efforts to improve communication at the end of promotional period
                                                                                                                            • Figure 37: Likelihood to switch credit card provider, May 2016
                                                                                                                          • Younger age groups more likely to switch
                                                                                                                            • Figure 38: Likelihood to switch credit card provider, by age, May 2016
                                                                                                                          • People with higher credit card debt are more likely to switch
                                                                                                                            • Figure 39: Likelihood to switch credit card provider, by level of credit card debt, May 2016
                                                                                                                        • Most Important Features when Choosing a Credit Card

                                                                                                                          • No fees are important when choosing a provider
                                                                                                                            • Figure 40: Most important features when choosing a credit card, May 2016
                                                                                                                          • A third want interest-free periods
                                                                                                                            • Low minimum repayments can lead to persistent levels of debt
                                                                                                                              • Better-off consumers can afford to look beyond interest rates
                                                                                                                                • Figure 41: Most important features when choosing a credit card, by financial situation, May 2016
                                                                                                                              • Switchers looking for interest-free periods
                                                                                                                                • Figure 42: Most important features when choosing a credit card, by likelihood to switch, May 2016
                                                                                                                              • People want multiple features
                                                                                                                              • Recent and Future Credit Card Behaviour

                                                                                                                                • Credit card market lacks loyalty
                                                                                                                                  • Figure 43: Credit card user future behaviour, May 2016
                                                                                                                                • Over half clear their balance every month…
                                                                                                                                  • Figure 44: Credit card user behaviour, May 2016
                                                                                                                                • … but those with outstanding balances more likely to switch
                                                                                                                                  • Figure 45: Credit card user behaviour, by likelihood to switch, May 2016
                                                                                                                                • Quarter of 18-24s use other credit products before a credit card…
                                                                                                                                  • …but they’re most likely to increase their spending over the next 12 months
                                                                                                                                    • Figure 46: Credit card user behaviour, by age, May 2016
                                                                                                                                • Attitudes towards Credit Cards

                                                                                                                                  • More than a third happy to use credit card for day-to-day expenses
                                                                                                                                    • Figure 47: Attitudes towards credit cards, May 2016
                                                                                                                                  • Interest rate is most important for those with higher levels of debt
                                                                                                                                    • Figure 48: Attitudes towards credit cards, by level of credit card debt, May 2016
                                                                                                                                • Attitudes towards Virtual Credit

                                                                                                                                  • Need for plastic cards declining
                                                                                                                                    • Over a third would be interested in using virtual credit
                                                                                                                                      • Millennials confident in the role of global tech companies in financial services
                                                                                                                                        • But there are potential long-term impacts of moving credit online
                                                                                                                                          • Figure 49: Attitudes towards virtual credit cards, May 2016
                                                                                                                                      • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                          • Abbreviations
                                                                                                                                            • Consumer research methodology
                                                                                                                                            • Appendix – Market Size and Forecast

                                                                                                                                              • Forecast of gross credit card lending
                                                                                                                                                • Figure 50: Forecast of gross credit card lending (non-seasonally adjusted), at constant and current prices, 2016-21
                                                                                                                                              • Forecast methodology

                                                                                                                                              Companies Covered

                                                                                                                                              To learn more about the companies covered in this report please contact us.

                                                                                                                                              Credit Cards - UK - August 2016

                                                                                                                                              £1,995.00 (Excl.Tax)