Britain’s Renewed Appetite for Credit Cards

Why It Matters

The rebound underscores stronger household balance‑sheet resilience and boosts banks’ fee and interest income, while reshaping the credit‑card versus fintech rivalry in the UK payments ecosystem.

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.

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.