Barclaycard writes off Euro 1.8bn in debts
Bad debts at Britain's biggest credit card provider have soared by
nearly two thirds to Euro 1.8 billion as record numbers of shoppers went
bust.
The amount Barclaycard said it has written off climbed 64 per cent
during last year, it said. Industry analysts believe the total UK credit
card debt written off this year could reach Euro 5 billion as the
plastic spending bubble bursts.
Barclaycard have written off a staggering Euro 1.8bn in debts.
The increase in bad debt has been seized by the banks to justify a
move to raise card interest rates to the highest level in 12 years.
The current average figure is 18.8 per cent, despite the fact the
Bank of England base rate is at a 300-year low of just 0.5 per cent.
The amount Barclaycard has written off has climbed by 64 per cent.
The banks the high rates are needed to reflect the fact customers are
considered a greater risk given the recession and high unemployment
figures.
Personal insolvencies hit a record high of 134,142 last year - 27,000
ahead of the previous record in 2006. Banks and other credit card firms
fuelled the spending bubble over the past decade. Cards were handed out
without proper checks on customers' ability to pay. Spending limits were
raised without customer requests, while expensive credit card cheques
were distributed like confetti.
The combination of this reckless lending and a 'spend now pay later'
attitude among shoppers has left the country owing more than Euro 54
billion on credit cards.
Barclaycard has 10.4 million UK card customers and 10.8 million in
the U.S., Europe and Africa - with outstanding credit card balances
totalling Euro 20.5 billion.
Overall, pre-tax profits at Barclaycard fell by 4 per cent to Euro
761 million, as the losses on bad debts offset increased lending levels
and improved margins.
The steep jump in bad debts was partly driven by higher default rates
on its Barclaycard loans.
It was also pushed up by the inclusion of Goldfish credit cards,
which it bought in 2008. Barclaycard, owned by Barclays plc, was the
first credit card introduced in the UK, coming into service in 1966.
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