Increase in credit card defaults expected

With consumers trying hard to keep on top of their finances, and with the ever tightening credit conditions causing problems for many, some industry officials have predicted that the level of credit card defaults is set to increase over the course of this year. This comes from a report that was recently released by Standard and Poor.

The report suggests that in addition to credit card default levels rising due to consumers struggling to make ends meet financially the level of defaults amongst prime mortgage customers could also increase. Many consumers are already finding it extremely difficult to keep up with debt repayments due to increased living costs and rising borrowing costs.

Many credit card firms have increased their borrowing rates and various other fees and charges, adding to the difficulties that consumers face. One official said: “The typical annual percentage rate on popular credit cards is around 16 per cent, which is over three times higher than the Bank of England base rate. This means we are forking out £7.7 billion in annual interest payments - around £250 for every credit card holder a year.”

He added: “APRs are not set in stone, and are open to negotiations. Every one per cent reduction in APRs represents an extra £74 million that go into consumers’ pockets to ease the credit crunch. It is a fraction of the £50 billion bailout that lenders are grabbing from the Central Bank, which is, after all, our money.”