Posted on November - 09 - 2009
Banks could raise credit card charges
Experts at PricewaterhouseCoopers say the moves will be necessary to cope with a 50% rise in bad debts on credit cards, expected to be close to £5bn by the end of next year.
PwC predict a personal debt timebomb where as many as 1,000 customers a day will find it necessary to seek help because they cannot cover repayments.
Because of this, they suggest banks will look at new ways to make money.
Many credit cards already carry an annual interest rate of more than 20% on outstanding balances, but this could climb above 30%. Cardholders may also have to pay £25 a year simply to have an account.
The banks are also expected to turn away customers who are not considered profitable.
The PwC study, called ‘Precious Plastic’, said: ‘Levels of write-off of this magnitude have never been experienced by the UK industry before.
‘Credit will become more expensive as lenders attempt to claw back revenue lost as a result of economic and regulatory pressures.’
CREDIT CARDS & LOANS: COMPARE & APPLY
At the high end of the market, it expects customers to be charged to have access to premium benefits, while at the lower end, marginal customers will be expected to pay fees for even standard credit cards.
Innovation is also likely to be a key feature of the market, with providers increasingly likely to offer contactless cards, prepaid cards and mobile payments.
The group said total household borrowing had remained broadly constant during the past 12 months at around £1.5 trillion, around £1.2 trillion of which is secured lending, while around £230bn is unsecured and owed through credit cards, loans and overdrafts.
The average UK household now owes £60,000, made up of a mortgage of around £50,000 and £10,000 of unsecured debt.
As a result, the average household spends around 15% of their take-home pay just on interest payments on debt.
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