UK credit card companies wrote off more than £3.5 billion in bad debts on their customers’ credit cards last year, new figures have revealed.
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Figures released by the Bank of England have shown that credit card companies wrote off £3.64 billion of their customers’ cards in 2011.
This means that 7% of all outstanding debt on credit cards was declared unrecoverable last year.
But last year’s written-off amount was actually less than in the previous year and in 2009, when more than £4 billion was written off each year.
In 2010, UK credit card companies wrote off a total of £5.32 billion in bad debt on existing credit cards. In 2009, the amount written off totalled a staggering £4.12 billion.
“Most of the major lenders have become very choosy in the last few years about who they will lend to with a card,” said David Black of Defaqto.
“This makes it more difficult for many people to borrow, which in turn prevents them building up bad debts in the first place.”
Credit card debt write-offs have increased dramatically since the recession in 2008. Before the banking crisis, write-offs were around £3 billion per year.
The Bank of England’s figures highlight the struggle many people and families face as a result of mounting credit card debt.
Borrowing money on credit cards is far higher than borrowing on things like mortgages or personal loans from banks.
It was found that the average interest rate on a credit card is currently 17.3% – the highest it has been in more than ten years. Some customers are even charged as much as 30%.
This is because credit card companies have to account for customers who fail to repay their outstanding debt, and the cost of repaying victims of fraud.