News & Views - Savantor

Credit crisis impact

Thursday, 17 July 2008

Up to now there has strangely been little talk of credit cards being affected by the credit crisis. Figures have shown steady levels of arrears indicating that many consumers have been paying off at least part of their balances. But this may be about to change as there are concerns that shortfalls on mortgage repayments could be made up with cash from credit cards. UK consumers are likely to fight hard to keep their houses, probably more so than in other countries, so that could put extra strain on credit card balances. With redundancies and layoffs increasing particularly in the construction industry and banks tightening up on loans then it seems logical that consumers will fall back on credit cards to see them through difficult times. Provident Financial has apparently seen a significant increase in applications for its Vanquis card even though it charges something like double the industry rates. MBNA is also taking measures by raising the level of minimum repayment. The company will raise its minimum payment for some cardholders from 3% to 5% from September. A recent Moneysupermarket survey also claimed that nearly a third of credit card holders have had their rates increased.

According to an article in the Sunday Times some analysts are suggesting that more than 20% of the money owed on UK credit cards is unlikely to be paid back. So the signs are there that the card industry could also be heading for hard times in the very near future.

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Ricardo Gomez, Director - Operations & Technology - WiZink Bank - Spain

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Mark Healy, Chief Risk Officer - NEOVIA Financial - UK

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Sean Sheehan, Service Management Director - Bank of Ireland

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