Bank Write-Offs For Bad Credit Card Debts Soaring

Fri, 22 Jan 2010

The amount of money written-off by banks as bad debts on their credit cards increased significantly in 2009, according to the Bank of England.

The Bank’s latest figures show that total value of credit card related write-offs doubled from around £800m in both the first and second quarter of 2009 to £1.6bn in the third quarter.

The high figure highlights the effect the recession has had on borrowers across the country, with many unable to keep up with their monthly credit card repayments .

It is also seen as an acknowledgement by the banks that the outstanding debts will never be repaid by their struggling customers.

Each year billions of pounds are set aside by banks and other lenders to cover potential losses on credit cards, mortgages, overdrafts and personal loans . Borrowings are only written off once the loss is crystallised as unrecoverable.

David Black, of the financial consultancy Defaqto, said that over the last four years banks have been much more cautious about who they lend to, with many of the major lenders restricting their new credit card and unsecured loan products to their current account customers.

"Banks also want to sweep bad news into one year's accounts to make future years look better," he added.
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