Massive Profits Meets Record Levels of UK Credit Card Debt Provisions

Who says that running a UK credit card company is not a profitable business? Who argues that the risks associated with right-off for bad credit credit card users makes the business of credit card a risky one? Well, however they are should take a look at some of the profit figures being published by many of the UK leading lenders this month! Several billions of pounds profit and record levels of credit card debt provisions tells the story that running a credit card business is very profitable indeed thank you very much.

The simple fact is that UK credit card issuers charge some of the highest rates of interest and fees in Europe. Given that 2 out of every 3 Britons will carry-over a credit card debt each month, and that a majority of those who do carry-over a credit card debt will only pay the minimum repayment amount, and it’s not hard to see how UK credit card issuers have a license to print money. Is it any wonder then that we now have the option of over 1,000 credit card issuers to chose from?

In reply to most UK card issuers claims that many of their cardholders are in default, the answer appears to be clear – yes, they are. However, they’re not sufficiently in default to warrant any significant note being made on their UK credit rating report and with so many of us acutely aware of what the effect of having a bad credit rating will have on us, nearly all of us will do anything we can to make sure this is avoided. That means paying the minimum repayment to each credit card issuer and then using the available balance each month to survive. The robbing Peter to pay Paul syndrome. And guess what? UK card issuers love this type of credit card user because we fit the bill of what makes a nice fat profitable customer. No wonder then that this year has been such a profitable one for the UK credit card industry.

The only question remaining then is how the latest shock rise in interest rates is going to affect this already precariously balanced juggling act of paying bills and trying to survive. It could well be the case that many more of us in the UK become credit card defaults in the next 12 months – and therefore UK credit card issuers would do well to provision for this.

Richard Smith
5th August 2006

More Information:

• Causes and Cures Of Credit Card Debt
  For some, credit cards can prove a temptation too far, and soon they find themselves in debt. Simple precautions will keep the savvy card holder from such dangers.

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