Credit card write-offs increasing

UK banks and financial institutions have increased the amount of credit card lending they are writing off. The Bank of England has released figures that show, in 2009, the amount written off by credit card lenders rose to a record GBP4.12 billion, which was about 10 per cent of all the money lent on credit cards in the UK. It also revealed that in the first three months of this year, write-offs increased to GBP1.25 billion, the second-highest quarterly amount on record.

However, with house prices finally on the rise and the number of homes being repossessed dropping, the amount of money that was written off on mortgages decreased to GBP160 million, which was the lowest quarterly figure for a year and a half. Repossessions in the UK fell by 7.5 per cent in the first quarter of 2010.

The latest Financial Stability Report by the Bank of England also showed that losses on credit card lending was a major factor in pushing up the interest rate margin charged on them.

The figures reveal that the average UK credit card rate was 16.51 per cent in April this year, which was a slight increase over July 2007, when it was up to 15.2 per cent. Of course, over that time period the bank rate fell from 5.75 per cent to only 0.5 per cent, which provides the credit card companies with greater financial leeway.