Britain’s Renewed Appetite for Credit Cards

Key Takeaways

• Credit card balances hit £78 bn, record high.
• Net lending rose 12.4% YoY in December 2025.
• Debt‑to‑income ratio half pre‑GFC levels.
• Arrears remain low at ~1.2% of balances.
• Banks outpace fintech, reporting double‑digit card growth.

Summary

The UK credit‑card market has rebounded, with net lending up 12.4% year‑on‑year in December 2025 and outstanding balances reaching a record £78 billion. Despite higher unemployment and elevated household debt, arrears sit at just 1.2%, and debt‑service ratios are roughly half of pre‑global‑financial‑crisis levels. Major banks such as NatWest, Lloyds, Santander and Barclays report double‑digit growth in their card portfolios, suggesting renewed consumer confidence rather than distress borrowing. The surge also signals a shift in the competitive landscape, with traditional issuers regaining ground over fintech alternatives like BNPL.

Pulse Analysis

The latest Bank of England data reveals that UK credit‑card borrowing is expanding at a pace not seen since the pre‑pandemic era. Adjusted for inflation, the growth aligns with historical norms, and the surge is supported by a still‑elevated savings buffer that cushions households against short‑term income shocks. This nuanced picture challenges the narrative that rising credit usage automatically signals financial fragility, highlighting instead a measured confidence among consumers who are comfortable leveraging revolving credit for larger purchases.

For incumbent banks, the credit‑card renaissance translates into a valuable revenue stream amid tightening margins elsewhere. Strengthened underwriting standards and seamless digital onboarding have allowed traditional issuers to capture market share from fintech challengers that once threatened to displace revolving credit with buy‑now‑pay‑later (BNPL) schemes. The low arrears rate—around 1.2%—suggests that risk remains contained, but banks must continue monitoring labour‑market trends, as a deterioration could quickly shift the risk profile of their card books.

Looking ahead, policymakers and regulators will likely keep a close eye on the balance between credit growth and household debt sustainability. While current debt‑to‑income ratios are comfortably low, any sustained rise in unemployment or a slowdown in wage growth could alter the dynamics. For fintech firms, the lesson is clear: integration with established card ecosystems and a focus on consumer protection may be more viable than pursuing standalone BNPL models. Overall, the credit‑card upswing signals a resilient consumer base and a re‑assertion of traditional payment instruments in the UK’s financial landscape.