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Uk Credit Card Losses Running At £4 Billion Annualised

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http://www.thisismoney.co.uk/credit-and-lo..._id=62&ct=5

Families hit by credit card crisis

Sam Fleming, Daily Mail

28 July 2009

A tidal wave of credit card defaults is driving tens of thousands of families to financial ruin and worsening the recession.

A decade of profligate lending has driven British families' debt to the highest level of any leading economy, according to the Organisation for Economic Co-operation and Development (OECD).

Bank of England figures due within weeks are forecast to show that lenders were forced to write off an estimated £1bn of credit-card loans between April and June.

That is the highest figure since 1993, during the last recession, and it is expected to climb further this year. It is 16 times the amount recorded when Labour took power in 1997.

The surge in bad debts will bring total bank write-offs on personal loans, including mortgages, to as much as £2.25bn, according to estimates by the research company Capital Economics. That is also a record high and it compares with £1.96bn in the same quarter of 2008.

The soaring defaults could intensify the banking crisis as more families spiral into bankruptcy. Debt advisers at the Association of Business Recovery Professionals forecast 139,200 individuals will become insolvent this year, up 31% from 2008.

That will trigger further write-offs on banks' balance sheets, prompting them to restrict the supply of credit and increase interest rates, deepening the recession.

They fear that with unemployment likely to rise to at least 3m from 2.4m, the painful toll of debt defaults will only worsen.

Peter Sargent, a partner at insolvency specialists Begbies Traynor, said: 'More and more people are staring financial ruin in the face. The number defaulting on their credit card debts is growing, and therefore the number of personal insolvencies will grow over the next two years.

'We have lost the value of thrift in this country, and so people don't have any savings to fall back on.

'This is all very well when people are earning, so they can afford to service their debt, but if they lose their job they've had it.'

Conservative Treasury spokesman Philip Hammond said: 'The thousands of families being pushed into credit-card default is the human face of Gordon Brown's decade of irresponsibility.'

The alarming estimates suggest that the banking crisis which has crippled the economy is far from over. Alysoun Stewart, a partner at accountants Grant Thornton, said: 'Given the increases in unemployment, credit card write-offs will accelerate which will clearly impact on banks' willingness to extend credit.

'This is a vicious circle, and it is difficult to see how the whole thing will be unlocked.'

Britons' personal loans are now worth 170% of their income, a record high and worse than figures in the US and other major European Union nations, according to the OECD.

Banks argue there is little sense in adding to that burden by spraying yet more easy credit at families. But without additional lending, the economy is likely to continue its downward spiral.

Official figures on Friday showed the largest decline since quarterly records began in 1955.

RIP Britain :(

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Is rising credit card debt really about lack of thrift or is it about a working population who could only survive day to day living through credit? The tax take by Labour increased massively over the 12 years along with rising housing and utility costs. Its quite telling that there are a number of people on the HUGZZZ site who are massively in debt but have very little to show for it, seemingly having spent their money on just getting through the month.

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Is rising credit card debt really about lack of thrift or is it about a working population who could only survive day to day living through credit? The tax take by Labour increased massively over the 12 years along with rising housing and utility costs. Its quite telling that there are a number of people on the HUGZZZ site who are massively in debt but have very little to show for it, seemingly having spent their money on just getting through the month.

I'm guessing a mixture of people as you describe, and people who just wanted a champagne lifestyle on lemonade money.

I have no idea about the figures, but my guess would be that most of the people with massive CC debts are not the sort of people you describe. CC's used to be a luxury, now it is normal to spend spend spend.

In the past I did have massive CC debts, but managed to pay it off.... if in conversation I mention that try my best to clear my CC every month, the reaction suggests that it's unusual.

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Is rising credit card debt really about lack of thrift or is it about a working population who could only survive day to day living through credit?

Well if by surviving day to day you mean buying property they can't afford, buying cars they can't afford, going on holidays they can't afford, etc, etc, etc.

It is surprising how little you can live on if you put your mind to it.

You don't need to spend 200 quid a week on food for two people, you don't need brand new mobile phones, laptops, plasma. They were simply living an 'aspirational' lifestyle they can't afford.

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Well if by surviving day to day you mean buying property they can't afford, buying cars they can't afford, going on holidays they can't afford, etc, etc, etc.

It is surprising how little you can live on if you put your mind to it.

You don't need to spend 200 quid a week on food for two people, you don't need brand new mobile phones, laptops, plasma. They were simply living an 'aspirational' lifestyle they can't afford.

To be fair, there are a few out there (well, there's one at least, and no it's not me) who's ended up with an unmanageable CC bill despite some pretty damn frugal living. That said, on the whole I think you're right there, especially when it comes to the really big borrowers. Yes, I can quite see how someone on a very tight budget could end up with a few hundred quid on there thanks to a load of badly timed life events (puncture, washing machine dies, etc.), but to run up the larger bills takes serious effort.

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Well if by surviving day to day you mean buying property they can't afford, buying cars they can't afford, going on holidays they can't afford, etc, etc, etc.

It is surprising how little you can live on if you put your mind to it.

You don't need to spend 200 quid a week on food for two people, you don't need brand new mobile phones, laptops, plasma. They were simply living an 'aspirational' lifestyle they can't afford.

+1

Absolutely.

I'm earning 3x what I was 8 years ago and yet I haven't increased my consumer expenditure. Once you've got used to living on a certain budget and within/below your means you just get accustomed to it.

The rest I've been putting towards a deposit.

Hmm... I wonder what the effect of all this will be on house prices...?

And "no one could see it coming". :rolleyes:

Edited by ChesterCopperpot

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Guest KingCharles1st
Well if by surviving day to day you mean buying property they can't afford, buying cars they can't afford, going on holidays they can't afford, etc, etc, etc.

It is surprising how little you can live on if you put your mind to it.

You don't need to spend 200 quid a week on food for two people, you don't need brand new mobile phones, laptops, plasma. They were simply living an 'aspirational' lifestyle they can't afford.

Yes, but....

how about the deals on a new Ford , that prey on the credit cycle. Wifey gets a shiny new car for a huge discount, and it's great, but then after 2 years or so it has to be replaced with another one, or else the penalties are HUGE.

Or the Panasonic home base station phone that is perfect for two years, then the buttons stick, and it's ***** after that. or , -you know where I'm going here.

I genuinely feel that most people start off down the C.C. route with the best intentions, and they just really don't appreciate and fully understand the mess it is easily possible to get into.

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I genuinely feel that most people start off down the C.C. route with the best intentions, and they just really don't appreciate and fully understand the mess it is easily possible to get into.

I don't have any sympathy tbh.

It is not a difficult concept to understand.

If you buy something on CC or HP then you have to pay the money back, with lots of interest.

Just how it is possible to NOT understand this is quite difficult for me to grasp. :huh:

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Can somebody please tell me why I can't stop at a service station, go through an airport or generally go anywhere without somebody trying to get me to sign up to a credit card if losses are mounting?

That and Virgin trying to double my limit.

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Can somebody please tell me why I can't stop at a service station, go through an airport or generally go anywhere without somebody trying to get me to sign up to a credit card if losses are mounting?

That and Virgin trying to double my limit.

I got my credit limit increased from £7,500 to £17,000 without asking on my AMEX card which I have only had for just over a month

The company is in financial trouble (it stopped pension contributions a couple of weeks ago).

It looks like a dangerous game of double or quit. If the loans go bad they will get taken over by a nationalised bank and dumped on the taxpayer

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How many monthly mortgage payments are being paid for on credit cards? I know of two housholds that have paid that way for nearly two years.

There were some figures published at the begiining of this year and it was bad then and must be worse now.

It seems a reasonable thing to do if you are going bust anyway.

It makes little difference if you go bust owing £150 or £150,000 so you may as well carry on living in your home as long as you can.

You never know, some idiot politician might write off your debts what with it being the right thing to do to help hard working families.

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I'm guessing a mixture of people as you describe, and people who just wanted a champagne lifestyle on lemonade money.

I have no idea about the figures, but my guess would be that most of the people with massive CC debts are not the sort of people you describe. CC's used to be a luxury, now it is normal to spend spend spend.

.

As an example, my neice has just started her first FT job.

She's on 23K and is living at home (not by choice, it's just happens to be where the job was).

She has a student loan to pay off but no other loans. When she added up her monthy spending she said "I can't live on this!"

Her mother told her that "some people bring up a family on that salary", but she still can't get her head around the fact that (at least) half of her so called necessary spending is completely optional.

I am sure that she would still want to spend this much if she wasn't earning.

tim

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Can somebody please tell me why I can't stop at a service station, go through an airport or generally go anywhere without somebody trying to get me to sign up to a credit card if losses are mounting?

That and Virgin trying to double my limit.

Strange. I had the opposite experience. Virgin halved my limit to £12,500 a few months ago. Also they increased the interest rate to 34%.

As the 0% deal had run out a couple of months previous (i'd been bouncing a large balance transfer between cards for a while) I paid off the remaining £700 and bailed out.

They obviously don't want my business anymore.

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I got my credit limit increased from £7,500 to £17,000 without asking on my AMEX card which I have only had for just over a month

The company is in financial trouble (it stopped pension contributions a couple of weeks ago).

It looks like a dangerous game of double or quit. If the loans go bad they will get taken over by a nationalised bank and dumped on the taxpayer

That's interesting doc... I literally just took out an AMEX card with a 7.5k limit. I actually wanted higher so wouldn't mind being bumped up. Are you a home owner?

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That's interesting doc... I literally just took out an AMEX card with a 7.5k limit. I actually wanted higher so wouldn't mind being bumped up. Are you a home owner?

Yes a home owner but no mortgage or debts. Oddly your credit rating is lower if you dont have outstanding debts. The highest credit rating is when you have debts but never miss a payment

The AMEX card is great for the first 3 months because you get 5% cash back. Not as widely accepted as Visa though.

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Her mother told her that "some people bring up a family on that salary", but she still can't get her head around the fact that (at least) half of her so called necessary spending is completely optional.

And her mother was completely wrong. Some people bring up a family on that salary plus considerable state benefits. They don't do it on the salary alone.

(That said, yeah, she's clearly pissing a lot of money up the wall)

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Is rising credit card debt really about lack of thrift or is it about a working population who could only survive day to day living through credit? The tax take by Labour increased massively over the 12 years along with rising housing and utility costs. Its quite telling that there are a number of people on the HUGZZZ site who are massively in debt but have very little to show for it, seemingly having spent their money on just getting through the month.

Spot on.

Gordon could not have expanded the tax rake off without many people having the release valve of credit cards to spread the load. Once you get into 17%+ p.a. compounded interest you're f*cked. The faster you peddle the worse it gets. Gordon doubled council taxes during this period forcing people to buy food on credit. Supermarkets started taking credit cards, banks kept increasing limits etc etc.

Gordon created a virtuous circle of effectively charging his taxes to the banksters via an illusion of increased prosperity which never existed in the first place. Now the banksters have transferred that increased tax rake onto the taxpayer and Gordon (and the Tories) intend to pay it down using even further increases in taxes.

Gordon and his bankster buddies should all be in prison. It was a simple tax ponzi scheme, paying new taxes out of increased debt until there were no more punters. The solution is to slash taxes.

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Is rising credit card debt really about lack of thrift or is it about a working population who could only survive day to day living through credit? The tax take by Labour increased massively over the 12 years along with rising housing and utility costs. Its quite telling that there are a number of people on the HUGZZZ site who are massively in debt but have very little to show for it, seemingly having spent their money on just getting through the month.

Yes, it's mainly all about being only able to survive day to day living through credit. For many students, it's been the only way to get through your studies. Many who are working have too many outgoings. It effects all age groups such as those facing pay cuts, redundancy, divorce. Generally there is a series of events that trigger the use of credit cards.

I can see many people who just think 'sod it, in for a penny in for a pound'. Wages in real terms are at an all time low: wages have been kept down and availability of credit has been eased. Wages are at an all time low and hence house prices are at an all time high. And the banks have been happy to step in to fill the gap. It's going to be a massive transfer of wealth.

It's 'all quiet on the western front', i.e. there has been a total lack of action from politicians, business and the media with regards to discussing the general effects of low wages supplemented with credit easing such as liar loans and credit card debt in the UK. The working population have had to play the cards as have been dealt to them! This is the second wave of the credit crunch - and it's going to be severe. There will be consequences for everyone, whether they have borrowed heavy or not.

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As an example, my neice has just started her first FT job.

She's on 23K and is living at home (not by choice, it's just happens to be where the job was).

She has a student loan to pay off but no other loans. When she added up her monthy spending she said "I can't live on this!"

Her mother told her that "some people bring up a family on that salary", but she still can't get her head around the fact that (at least) half of her so called necessary spending is completely optional.

I am sure that she would still want to spend this much if she wasn't earning.

tim

It's amazing how financially naive people, especially young people, are in this country.

Maybe if our rotten, useless state educational system gave youngsters a few classes on debt and money management it would help stop these people from having to learn through painful experience.

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Debt collection agencies will be hiring then?

I think much of the problem is a lot of people in this country simply don't understand how interest rates work and therefore don't understand how using a credit card is a bad idea. That and the normalisation of debt for some people with the introduction of student loans, easing of credit - the everyone is doing it mentality. I remember for some people it just became this unimaginably large number and they basically stopped thinking about it. People assume they are safe with the herd.

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It's amazing how financially naive people, especially young people, are in this country.

Maybe if our rotten, useless state educational system gave youngsters a few classes on debt and money management it would help stop these people from having to learn through painful experience.

I'm assuming that's a dig at what "new Labour" have done to the state educational system and not a dig, per se, at those who received a state education (which I once heard a snivelling little Yar refer to as "council school").

As it happens I had an excellent education at a state school including money management (it was called "Accounts" and "Home Economics" back then). I left school in 1996 so don't know what effect Labours meddling had.

Besides, my parents were also very good at managing money - I suppose you have to be when you don't have much of it - and brought us up well.

Schools should be there to teach youngsters English, Maths, History, Geography, Science and at least one foreign language (I wish, anyway).

It's the role of the parent to teach youngsters the difference between an 4rse and an elbow.

Edited by ChesterCopperpot

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