Credit-Card Spending Is Falling - And It Might Be Warning Us About What Comes Next

10th December 2025

In recent months, a clear message has been emerging from consumer-spending. Data credit-card use is slipping, and it's doing so at a pace that economists and lenders haven’t seen in years.

At first glance, that may sound like a positive trend perhaps people are paying down debt or avoiding risky borrowing. But a closer look reveals something very different. Credit-card spending is dropping while credit-card balances are rising.

This combination isn’t a sign of financial health. It’s a sign of strain. And it may be hinting at something bigger brewing beneath the surface — possibly even the early tremors of a broader economic slowdown.

The Drop - What the Data Tells Us

Recent reports from consumer-credit analysts show that average monthly credit-card spending has fallen compared to last year. In the UK — where the trend is especially pronounced — card spending fell both month-on-month and year-on-year. This aligns with wider data showing that total consumer card spending (credit and debit combined) has been dipping, with one November report marking the steepest fall since early 2021.

But here’s the twist even though people are using their cards less, the balances they carry on those cards continue to grow, and the portion of those balances that consumers actually pay off each month is shrinking.

In other words, households are putting fewer new purchases on cards, while at the same time leaning more heavily on existing credit to manage day-to-day costs. That’s not the profile of a thrifty consumer. It’s the profile of a stretched one.

Why Credit-Card Use Is Dropping

Several forces are converging to push credit-card use down:

1. The Cost-of-Living Squeeze

Inflation may have cooled in some areas, but prices for essentials are still historically high. As households feel the pinch, many cut back on discretionary spending — restaurants, leisure, retail — the categories where credit cards often dominate.

2. Weak Consumer Confidence

When people worry about their jobs, their savings, or the direction of the economy, the first thing they cut is non-essential spending. Recently, surveys show a distinct drop in consumer optimism, leading to more cautious financial behaviour.

3. Rising Balances, Falling Repayments

Higher card balances and lower repayment rates suggest that consumers aren’t avoiding credit because they’re flush with cash. They’re avoiding it because they’re already maxed out and trying to avoid digging deeper.

4. Tighter Lending Conditions

Banks and lenders have become more conservative with new card issuance. When credit is harder to access, overall credit-card activity naturally slows.

5. Shifting Lifestyle and Spending Choices

Some groups, especially younger consumers, report cutting leisure spending — including nights out, entertainment, and food and drink purchases. These categories historically rely on card payments, so a shift here directly affects card-usage metrics.

Does This Mean a Recession Is Coming?

A decline in credit-card spending isn’t enough on its own to forecast a recession. But it is one of the earliest behavioural markers economists watch for, and right now, it’s flashing amber.

Here’s why it matters

1. Consumer Spending Drives the Economy

In many developed economies, consumer spending accounts for more than half of all economic activity. If people are buying less, businesses earn less, hiring slows, and economic momentum fades. Card-spending data is one of the fastest ways to detect shifts in consumer behaviour.

2. Card Spending Declines Often Track Falling Confidence

Historically, drops in credit-card spending coincide with periods when consumers lose faith in the economic outlook. Declining confidence is itself a recession predictor.

3. Debt Stress Can Trigger Broader Slowdowns

When households meet rising living costs by carrying larger balances, they leave themselves vulnerable. Any shock — rising interest rates, job losses, wage stagnation — can quickly ripple across the economy.

4. The Trend Is Moving With Other Warning Indicators

Recent analyses show several recession indicators softening at the same time: slowing GDP growth, weakening retail sales, and reduced business investment. When card-spending drops in sync with these factors, the risk of recession becomes more credible.

But It Isn’t a Guarantee

Still, it’s important to keep perspective. A few months of weaker card spending is not a recession in itself. There are other possible explanations:

Consumers may temporarily hold off spending while waiting for policy changes or budget announcements.

Some spending may be shifting away from cards toward direct debit, cash, or mobile payments.

A period of cautious spending doesn’t always indicate structural economic weakness — sometimes it's a pause, not a downturn.

A recession isn’t inevitable. But the direction of travel is worth paying attention to.

What This Means Right Now

Credit-card behaviour is telling us that households are uneasy. They’re buying less, borrowing more, and paying down less of what they owe. That combination has historically preceded economic downturns though not every time.

If spending continues to slide, and if other signals (employment data, GDP growth, business output) continue to weaken, this could be the early stage of a significant economic slowdown.

For now, the message is caution not panic. But caution is often how recessions begin.