Credit card transactions to carry on shrinking

The credit card market is expected to continue shrinking during 2010 as Britons focus on reducing their debt.

Market analyst Datamonitor predicts the total value of credit card transactions will drop by 2.7 per cent this year, a decline of 3.1bn, to 110.59bn.

The slide comes after the market contracted by a record 7.8bn in 2009, and the group does not expect it to return to growth until 2011.

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Even then, the total value of transactions is only expected to rise to 113.37bn, still well down on the peak of 121.4bn reached in 2008.

The research also found that there had been a 10 per cent fall in the number of credit cards in issue during 2009 as issuers aggressively reduced the number of dormant accounts people had.

The group said the outstanding balances people had on their cards was also falling, as was the value of the average transaction, which dropped to 62 in 2009, down from 64.90 the previous year, and it is expected to fall further in 2010 to 60.70.

It said that during most months of 2009 the total value of transactions was between 1bn and 1.5bn lower than it had been a year earlier, which it warned was impacting on card providers' revenue.

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Gilles Ubaghs, financial services analyst at Datamonitor, said: "This decline in transaction values is problematic for card issuers, but is not as severe as was initially feared at the beginning of 2009.

"While falling transaction values will impact issuer revenues, falling balances, and hence lower exposure to risk, alongside potentially stabilising levels of write-offs mean that they should be better placed to handle this."

He added that although credit card transactions had seen a strong decline as a result of the recession, compared to other forms of consumer credit, the fall had been more moderate and stable.

He said: "Although the overall sums involved in the credit card market are much greater than for other forms of credit, the overall level of decline in year-on-year quarterly growth reached a low of minus 8.5 per cent in the first quarter of 2009.

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"However during this same time period, unsecured personal loans dropped by 30.1 per cent and motor finance loans fell by 22.2 per cent."

n A debt charity this week said it had seen a sharp increase in the number of people seeking help online.

The Consumer Credit Counselling Service (CCCS) said its online debt counselling tool, CCCS Debt Remedy, had 86,444 unique users during the first three months of the year.