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"Defaults on credit cards may rise"

By admin | July 6th, 2008 | Credit Cards

There are concerns from some industry officials that default levels on credit cards amongst UK consumers could rise, with households already struggling to try and keep on top of debt and financial commitments, with many finding that their income no longer comes anywhere near covering their outgoings. With an increasing number of households being tipped over the financial edge the number of people falling behind with credit card repayments could rocket.

Whilst the base rate has dropped three times since December of last year many industry officials have pointed out that the interest rates and charges on credit cards have continued to rise, which further increases the risk of more defaults on credit cards. One official recently stated: “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 went on to state: “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.”

There are many other issues that are affecting household finances at the moment, and some officials have gone as far as to say that consumers are facing their most challenging time in around two decades in terms of finances. Soaring petrol, food, and energy prices are amongst the issues that are having a negative impact on finances, as well as pay rises that are well below the current rate of inflation, which has soared to 3.3%.

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Tags: credit card defaults

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