With the recent figures released on credit cards and how much money the banks have had to write off in credit card debt, higher rates and penalties seem inevitable. In the third quarter of 2010, banks wrote off £3.47 billion – of which £2.14 billion was credit card debt. This figure is an indicator that 2010 will far outweigh the amount written off in 2009.
In 2009, £4.1 billion was written off on credit card debt, this amounted to 10% of the total amount lent on cards. Possible reasons for the new 2010 increase would include the wider knowledge that credit card debt can sometimes be written off through debt management and ivas.
People are more knowledgeable now, knowing that often their bank will take a lesser amount through a deal, rather than nothing through the borrower going bankrupt. This new awareness has hit the banks harder in 2010 and they will no doubt hit back by increasing profits from those who DO pay their credit card debts.
The U.K figures are in contrary to the latest figures from the USA, which show that “in July Defaults on U.S. credit cards in July fell to the lowest level in 15 months, while late payments also declined”, Fitch Ratings said on Wednesday. Whilst some think that greater consumer awareness in their rights is to blame for the U.K increase, other popular opinion is that it is residual over borrowing from earlier years, which is starting to catch up with U.K borrowers.