Britain’s renewed appetite for credit cards

The UK’s credit card market is enjoying an unexpected revival.

Britain’s renewed appetite for credit cards

After years in which regulators, fintech challengers and pandemic-era savings appeared to dampen demand, plastic has reasserted itself as a central pillar of household finance.

According to the Bank of England, net credit card lending expanded by 12.4 per cent year-on-year in December, pushing outstanding balances to a record £78 billion.

At first glance, the optics are troubling.

Unemployment has edged up to 5.2 per cent, consumer debt sits at historic highs and economic growth remains fragile.

A familiar narrative suggests households are leaning on revolving credit to bridge the gap left by inflation’s prolonged squeeze.

Major lenders — including NatWest, Lloyds Banking Group, Santander UK and Barclays — have all reported double-digit growth in their credit card books during 2025, raising concerns about risk appetite late in the economic cycle.

Yet the data does not point to systemic stress — at least not yet.

Debt Growth in Context

Headline figures mask a more nuanced reality.

Adjusted for the inflation shock of the past three years, the pace of credit card lending growth since early 2022 broadly aligns with pre-pandemic norms.

This is not the kind of unsustainable acceleration typically associated with overheating consumer credit markets.

Moreover, debt servicing metrics remain contained. The central bank estimates that the proportion of household income devoted to debt repayments is roughly half the level seen before the global financial crisis.

Consumer credit in arrears stands at around 1.2 per cent — low by historical standards. At the same time, aggregate household savings remain comparatively elevated, providing a cushion against short-term shocks.

Sentiment indicators reinforce the picture of cautious resilience.

The latest GfK consumer confidence survey shows households feel relatively upbeat about their personal financial prospects, even if they remain sceptical about the wider economy.

Willingness to make major purchases has reached its highest level since early 2022. In other words, credit growth may reflect renewed confidence rather than distress borrowing.

The Fintech Challenge Revisited

The resurgence of traditional cards also carries strategic implications. Only a few years ago, fintech disruptors such as Klarna appeared poised to rewrite consumer credit.

“Buy now, pay later” products were widely touted as the generational successor to revolving credit, particularly among younger users wary of high interest charges.

Today, the competitive narrative looks different. Incumbent banks have strengthened underwriting, improved digital onboarding and integrated card propositions into mobile-first ecosystems.

Meanwhile, capital markets have reappraised the sustainability of standalone BNPL models.

Credit cards endure because they combine flexibility, consumer protections and broad merchant acceptance within a single, familiar instrument.

Far from being a relic, they remain embedded in the UK’s payments architecture.

The current upswing does warrant vigilance — especially if labour market conditions deteriorate.

But for now, Britain’s renewed embrace of credit cards appears less a warning sign than a reflection of measured confidence in household balance sheets.