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Bad credit card debts at `historic high`
According to a report by accountancy firm PricewaterhouseCoopers (PwC), card debts may account for as much as 9% of all outstanding balances by the end of 2010.
Bad credit card debts currently represent around 6% of all outstanding balances. And although the amount of credit cards in circulation has fallen by 8%, the firm said that debt levels in the UK remain `high compared with the rest of Europe`.
The firm expects borrowing rates on credit cards to increase as the level of bad debts rise, and annual fees to `become a common feature`.
In its new report, Precious Plastics, PwC said that each household in the UK has – on average – a total debt of around 60,000, made up of roughly 50,000 of secured debt and 10,000 of unsecured debt such as credit card debt.
Richard Thompson, partner, PricewaterhouseCoopers, said: “Over the last 12 months there has been a cooling passion for plastic – credit card borrowing has fallen by 3% to 64 billion and the number of cards in circulation has fallen by 8%.
“Bad debts in the sector have reached historic highs, standing at nearly 6% of outstanding balances. Our analysis suggests that bad debts are likely to continue to rise and could reach 9% by the end of 2010. This would have enormous implications for the profitability of credit cards in the UK market.”
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