Barclay’s writes off huge credit card debts

With the level of credit card debt in the UK having climbed to £5 billion many banks and card providers are seeing huge losses as a rising number of cash strapped consumers find that they can no longer afford to make repayments on their credit cards.

The financial crisis, the recession, and huge job losses have resulted in more people defaulting on their credit card and other debts, and this has had a huge impact on providers and lenders.

According to a recent report Barclay’s is one of the High Street banking giants that has seen the level of credit card defaults soar, and figures show that the banking giant has had to write off a massive £1.8 billion in bad debts, with the level of bad debt increasing by around two thirds.

Officials from Barclaycard said that the amount that it had to write off in bad credit card debt increased by 64 percent last year.

Industry officials have said that there is a chance that over the course of this year around £5 billion could be written off in total in bad credit card debt, and this is something that the banks and credit card companies have picked up on to try and justify the huge increases in credit card interest rates that some have been applying.

With the base interest rate standing at just 0.5 percent the gap between the average credit card rate and the base rate is now huge.

Banks have said that as a result of the effects of the recession, possible job losses, and higher risks the interest rates charged on credit cards have to be increased to reflect the increased risk that the lender is taking. However, banks have come under fire for spending the decade in the run up to the global credit crunch encouraging consumers to get into debt and practising irresponsible lending in some cases.