Credit cards 'becoming harder to repay'

27/07/2009

More and more people are likely to get snowed under with their credit card debts, as the recession drags on.

According to recent figures from the International Monetary Fund seven per cent of all consumer debt in Europe will be defaulted on, the Financial Times reports.

Moody's, a credit rating agency, also said that the overall UK rate of credit card charge-offs - the point at which the lender decides it's unlikely they'll get money owed back from a borrower - leapt from 6.4 per cent to 9.4 per cent over the past year.

The defaults are also putting the balance sheets of credit card providers serving the British market, including American Express and Barclaycard, under pressure.

Kevin Still, EuroDebt director, commented: "Many card issuers are seeing the number of accounts in arrears rise through the recession. Default levels are rising significantly and lenders are trying to reduce their levels of risk. This is reflected in lower acceptance rates for new plastic, tightening of credit limits on existing accounts and rising interest rates for new transactions. The option to close existing accounts when rates are increased may well be exercised by those consumers who have stopped using their 'inflexible friend'."

He added: "EuroDebt has seen a rise in the number of historically credit worthy consumers that have turned to Debt Management Plans because they are unable to use equity release or other forms of borrowing to tackle unmanageable levels of personal debt."

Tags; Debt Management and Banking, Credit Card Lifestyle, Recent Graduate Debt, Young Family Finances,

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