Cost of credit cards to rise, availability to fall

Credit card companies are labouring under a deluge of bad debt, as cash-strapped consumers find themselves unable to make the repayments on their credit cards. 

As a result, access to a credit card will be harder to get, borrowing rates will spiral, and monthly credit card fees could become standard, as credit card companies look for ways to increase their revenues, according to a new report by the accountancy firm PriceWaterhouseCoopers (PwC)*. 

Bad debts in the credit card sector are now at an all-time high of 6%, but the number of cards in circulation has tumbled by 8%, and borrowing is down 3%, as cards are cancelled or blocked and consumers refuse new debt. 

Credit card companies wrote off £3.2bn in bad debts last year, according to PwC, who predict that these levels will rise even further as more consumers are affected by unemployment, short-time working and pay cuts. 

“This will leave consumers surprised at both the cost of credit, and the difficulty in gaining access to it,” the report said. 

Credit card companies have hardened their attitudes to lending already, PwC said. “The recent announcement by one major issuer that they would not generally seek to acquire new credit card customers without those same customers also holding a current account with them is in stark contrast to the time when credit card issuers accounted for 1 in every 4 pieces of junk mail that made it through our letterboxes.” 

The UK Card Association, commenting on the PwC report, predicted a marked reduction in the choice of products and an overall increase in charges, with both increased interest rates and an expansion of annual and other credit card fees. 

*Source: “Precious Plastic 2010: Consumer Credit in the UK”, PwC 2009