Credit Card Irs And Bad Debt Still Rising (Bbc)

[koala_bear]

http://www.bbc.co.uk/news/business-12607773

Credit card interest rates still rising

Credit card debt write-offs have risen in recent years The average interest rate charged on a credit card has risen again, to 16.79%, says the Bank of England.

That puts the average rate at its highest level since February 2002, although the Bank rate remains at its historic low of 0.5%.

However, other figures from the Bank of England reveal that banks are still writing off huge losses on their credit card customers.

The Bank said that £5.3bn was written-off in 2010.

"Write-offs probably reflect historic lending on cards," said David Black of financial analysts Defaqto.

"In recent years card companies have been much more careful about who they will lend to, in terms of affordability and over-indebtedness."

With defaults by customers running at approximately 10% of all credit card lending, card companies have used wider profit margins to offset the losses they have been racking up.

In the 1990s, write-offs were at low levels, ranging from just £138m in 1995 to £490m in 1999.

But as credit card spending boomed, and the nation's personal debt rose to almost £1.5 trillion, card write-offs started to rise rapidly.

They reached £3.2bn in 2008, £4.1bn in 2009 and £5.3bn last year.

In January, accountancy firm PricewaterhouseCoopers predicted that interest rates on unsecured lending, such as credit cards, would rise by 2%-3% in the next three years.

It said this would add £1,800 a year by 2015 to a typical household's credit card and loan costs.

Am I the only one to find those default levels astonishing?

[R K]

With neg. real rates, insane unsecured lending rates, tightening fiscal policy and job cuts, the most sensible thing that could happen for the economy as a whole is to write off all outstanding CC debt, and cancel all existing cards.

Rich don't need them, poor can't afford them. They're insane. A temporary 'feel good' drug to hide the fact that globalisation has slashed real wages for years and most people are getting poorer.

[efdemin]

With neg. real rates, insane unsecured lending rates, tightening fiscal policy and job cuts, the most sensible thing that could happen for the economy as a whole is to write off all outstanding CC debt, and cancel all existing cards.

Rich don't need them, poor can't afford them. They're insane. A temporary 'feel good' drug to hide the fact that globalisation has slashed real wages for years and most people are getting poorer.

Great idea! Just give me a minute to max out the cards I've got.....

[R K]

Great idea! Just give me a minute to max out the cards I've got.....

Pre-existing.

If they're doing it for a certain percentage now anyway. It's not dissimilar in principle to Irish or bondholders taking a haircut.

[Don]

With neg. real rates, insane unsecured lending rates, tightening fiscal policy and job cuts, the most sensible thing that could happen for the economy as a whole is to write off all outstanding CC debt, and cancel all existing cards.

Rich don't need them, poor can't afford them. They're insane. A temporary 'feel good' drug to hide the fact that globalisation has slashed real wages for years and most people are getting poorer.

I think something like this is inevitable. So many people have tens of thousands on credit cards with no hope of ever paying it back. I suspect these increasing write-offs are the result of people realising that after making 5 or 10 years of minimum payments they've barely touched the amount owing and it will take, quite literally, a lifetime to pay back. Without massive wage inflation (unlikely) the only way out is default. Best for all concerned to get it out in the open and either write it all off or at the very least freeze the interest (and I say this with no credit card debt myself).

[fluffy666]

I think something like this is inevitable. So many people have tens of thousands on credit cards with no hope of ever paying it back. I suspect these increasing write-offs are the result of people realising that after making 5 or 10 years of minimum payments they've barely touched the amount owing and it will take, quite literally, a lifetime to pay back. Without massive wage inflation (unlikely) the only way out is default. Best for all concerned to get it out in the open and either write it all off or at the very least freeze the interest (and I say this with no credit card debt myself).

I suspect that a lot of people have done the whole Credit card run-up followed by MEW to pay them off (plus a bit extra for a new 3 series). Followed by running the credit cards up again. Except that MEWing dosen't work any more..

[interestrateripoff]

I suspect that a lot of people have done the whole Credit card run-up followed by MEW to pay them off (plus a bit extra for a new 3 series). Followed by running the credit cards up again. Except that MEWing dosen't work any more..

The house can pay the debt, I mean what could possible go wrong with that? It was a flawless plan you got to spend the money your house was making and every couple of years you remortgage, cleared the bills and started again, your house went up in value rinse and repeat. I wonder how many of these credit card junkies are now in negative equity and are carrying large credit card debts?

[winkie]

Somebody I knew had a large outstanding credit card bills and the maximum they could afford to repay each month was the minimum payments...they were not getting anywhere very quickly...anyway they got made redundant and used much of the redundancy to pay off all the cards....the social security told them they should not have used the redundancy money to do that...that money was for them to live on for as long as possible or until they found another job.....what is a man to do?

[interestrateripoff]

Somebody I knew had a large outstanding credit card bills and the maximum they could afford to repay each month was the minimum payments...they were not getting anywhere very quickly...anyway they got made redundant and used much of the redundancy to pay off all the cards....the social security told them they should not have used the redundancy money to do that...that money was for them to live on for as long as possible or until they found another job.....what is a man to do?

Unbelievable, so clearing debts isn't seen as a priority then when you've got no income?

[Realistbear]

http://uk.finance.yahoo.com/news/Defaults-credit-cards-hit-1-tele-2884335028.html?x=0

Defaults on credit cards hit more than £1 billion

Myra Butterworth, 17:17, Tuesday 1 March 2011

Credit card holders are struggling to keep up with their debts as figures show defaults soar to more than £1 billion.

Banks (SBK.NX - news) wrote off £1.18 billion worth of credit card debt during the last three months of 2010, up from £740 million the previous quarter, according to the Bank of England.

The figures also revealed a 22 per cent increase in cancelled mortgage debts, with £163 million written off during the three months.

So what do the Koalishon do in response. Lets get the banks to lend even more! Fools, why can't they see that the cycle will run its course and the more they try to stop it the longer it weill take to get back to recovery mode.

[winkie]

Unbelievable, so clearing debts isn't seen as a priority then when you've got no income?

I don't know, but from what was said the benefits office said they should not of spent the redundancy money on repaying the credit card debt because they would now have to help them with supporting them with paying the rent CT and with unemployment benefits for the family, when they should have used their redundancy money for that instead of paying the credit card debts.

[zebbedee]

I don't know, but from what was said the benefits office said they should not of spent the redundancy money on repaying the credit card debt because they would now have to help them with supporting them with paying the rent CT and with unemployment benefits for the family, when they should have used their redundancy money for that instead of paying the credit card debts.

Paying down debt is the one thing you CAN do and not have it be counted as disposing of assets to avoid them being counted towards your £16k limit for claiming benefits.

Edit for spellink

Edited March 1, 2011 by zebbedee

[winkie]

Paying down debt is the one thing you CAN do and not have it be counted as disposing of assets to avoid them being counted towards your £16k limit for claiming benefits.

Edit for spellink

Thank you for clarifying £6000 was a figure I was told but I suppose it tapers between the two figures....so would you recommend someone to repay their debt or even their mortgage if they have one from a redundancy payment?

[Alan B'Stard MP]

They wrote off 1.18Bil but how much did they make?

Edited March 1, 2011 by Alan B'Stard MP

[winkie]

They wrote off 1.18Bil but how much did they make?

Lots....but so did the retailers, business and tax man......everyone makes money from debt.

[okaycuckoo]

Write-offs must be tip of the iceberg. Very common to see people repaying £50k in defaulted CC debt at £100-200 per month without a court judgment.

One thing I'm always curious about is what triggers a write down by a lender, so that it has to be declared. Anyone have insight?

[nohpc]

It's all going to end in tears isn't it.

The only way out of this without extreme pain is high wage inflation allowing people to pay down their debts.

Of course, those of us lucky enough to have life time trackers can rely on low interest rates to help us pay down debts (even if we weren't struggling before)

[danlee74]

I do not believe any existing debts should be "written off" - at the end of the day Person A has spent the money so Person A should have to repay it unless certain circumstances are met (i.e. loss of job through involuntary redundancy / illness). Any debt forgiveness without condition sends out the wrong message in imo.

IF something has to be done on a grand scale, how about making sure all debts are known across the board (i.e. credit card and loan companies know about ALL other liabilities) so that informed decisions can be made about ability to repay. Repayment should be mandatory and bankruptcy/DRO's/IVA's should be a very last option (not a lifestyle choice) and only after a period of frugal living.

For information, I have always lived within my means and have one credit card of <1k on a 0% basis which I change annually to keep a reasonable credit rating. I have always earned less than average wage and I do not see why I should be punished for living a frugal life. If debt forgiveness is going to be introduced then ar5eh0les to being prudent, I will go out, load up on debt, live the "good life" for as long as I can manage then kop out and let someone else pay.

There is a lot of free help out there such as charities and citizens advice bureaus which can advise to a high standard but the individual must want that help and agree to do whatever is necessary to correct the situation, no matter how difficult - if debt forgiveness becomes the "norm" then where will the incentive to repay come from??!

[winkie]

It's all going to end in tears isn't it.

The only way out of this without extreme pain is high wage inflation allowing people to pay down their debts.

Of course, those of us lucky enough to have life time trackers can rely on low interest rates to help us pay down debts (even if we weren't struggling before)

There will be no high wage inflation....there will be no wage inflation for people without jobs, the state can't afford to increase the benefits in line with inflation.....a lifetime tracker is no good if you haven't got a job.

There were a few on tracker mortgages that will finish and a few on life time trackers, that will not last a lifetime.

[miko]

I do not believe any existing debts should be "written off" - at the end of the day Person A has spent the money so Person A should have to repay it unless certain circumstances are met (i.e. loss of job through involuntary redundancy / illness). Any debt forgiveness without condition sends out the wrong message in imo.

IF something has to be done on a grand scale, how about making sure all debts are known across the board (i.e. credit card and loan companies know about ALL other liabilities) so that informed decisions can be made about ability to repay. Repayment should be mandatory and bankruptcy/DRO's/IVA's should be a very last option (not a lifestyle choice) and only after a period of frugal living.

For information, I have always lived within my means and have one credit card of <1k on a 0% basis which I change annually to keep a reasonable credit rating. I have always earned less than average wage and I do not see why I should be punished for living a frugal life. If debt forgiveness is going to be introduced then ar5eh0les to being prudent, I will go out, load up on debt, live the "good life" for as long as I can manage then kop out and let someone else pay.

There is a lot of free help out there such as charities and citizens advice bureaus which can advise to a high standard but the individual must want that help and agree to do whatever is necessary to correct the situation, no matter how difficult - if debt forgiveness becomes the "norm" then where will the incentive to repay come from??!

I think you will find that in many cases involuntary redundancy / illness are the triggers for Bankruptcy/Dro's/Iva's.

In most cases any Credit Company will want to know about all other liabilities so they can make an informed decision about a debtors ability to repay before reducing payments or any debt forgivness. Pity they did not want to know peoples liabilities before throwing to much credit at them ( like our housing bubble ) things could have been prevented instead of reaching crisis point .

You have always lived within your means great. Why are you being punished for living a frugal life ?

You are not paying for the debt write offs the people having their debt's written off have over the years paid massive amounts of interest and late payment charges to the companises writing off their debt , they would have been paying interest on top of interest . The debts now being written off are not losses by the card companies they are in fact future profit projections that will now not happen . However over the years they have had made massive amounts of money form these people , so if anyone is paying for the write offs it is the same people having debt writtten off they have already paid for it. THE CC COMPANIES ARE REAL SHARKS.

To be declared bankrupt you lose everything the only way to keep your house is if it is in negative equity , bankruptacy will haunt you for years i dought many would make it a life style choice.

[danlee74]

I think you will find that in many cases involuntary redundancy / illness are the triggers for Bankruptcy/Dro's/Iva's.

In most cases any Credit Company will want to know about all other liabilities so they can make an informed decision about a debtors ability to repay before reducing payments or any debt forgivness. Pity they did not want to know peoples liabilities before throwing to much credit at them ( like our housing bubble ) things could have been prevented instead of reaching crisis point .

You have always lived within your means great. Why are you being punished for living a frugal life ?

You are not paying for the debt write offs the people having their debt's written off have over the years paid massive amounts of interest and late payment charges to the companises writing off their debt , they would have been paying interest on top of interest . The debts now being written off are not losses by the card companies they are in fact future profit projections that will now not happen . However over the years they have had made massive amounts of money form these people , so if anyone is paying for the write offs it is the same people having debt writtten off they have already paid for it. THE CC COMPANIES ARE REAL SHARKS.

To be declared bankrupt you lose everything the only way to keep your house is if it is in negative equity , bankruptacy will haunt you for years i dought many would make it a life style choice.

Hi miko

I accept that the poor souls made redundant or getting ill would need to have some help - some things are totally unforeseeable. But in many cases debt "solutions" have to be found for idiotic people who borrowed more than they could reasonably repay - there is an element of blame to the lender (for sure) but more on the shoulders of the borrower as they knew the situation they were creating for themselves, or at least they should have.

I'm not sure that loan / credit card companies have access to a potential customers full credit history? I know there is a "credit score" available but what I would like to see would be a privately controlled central agency holding all balance information for everyone (funded by credit agencies) - obviously this would be highly controversial and may even infringe some human rights but done properly and sensitively would protect society from credit bubbles like the one seen in the past decade.

I feel (rightly or wrongly) that I am being punished for being frugal by government actions (past and present) and my savings are earning a negative return (3% interest rate, 4% inflation). Despite being born in 1974 I was not in a position to even start thinking about house purchase until 2002/3ish (medical problems in very late teens/early 20's and then paying off Uni debts after graduating in 1999 [i am debt averse]) by which time I knew that the housing market was dysfunctional ... 10/20% increases per annum is never right!! It should have been deflated then whilst it was comparatively manageable but the government of the time thought they knew better.

I agree that credit card companies are sharks (I have several friends who have chequered financial histories) and the penalties issued for late- or non-payments are obscene. However, when you sign up for credit you should read the small print and know what can happen. Also if you are sensible with the credit you should not get into the position where you need to start thinking of penalties.

Maybe I was a bit flippant with the comment as "a lifestyle choice" but I was frustrated with the thought that those who had enjoyed a better life than me whilst earning less than me (anecdotally through friends) could be "forgiven" their debts. However, I do know a couple of people who have done very well churning up 30/40k-odd of debts, going bankrupt and then making measerly payments as instructed by the courts for 7 years (I believe but am happy to be corrected) whilst going out Fri/Sat nites and Sun lunchtimes - granted they are renters and not "homeowners" but the point remains. Someone is picking up the tab for the debt write-offs they have gotten away with.

[iamdamosuzuki]

The banks cajoled and encouraged the financially illiterate to get up to their necks in CC debt. They exploited every ounce of ignorance with small print, fabricatons and the hard sell. IMO they deserve everything they get.

I'm about to pay off the last of my credit cards, and having been pumped with massive IR's because of their greed in selling totally unsuitable products to the vulnerable and the young (18 and you are meant to be able to be all grown up about 30k for nothing - pffffffffft.) they can F off.

I'm sick and tired of hearing about individual responsibility. These are powerful, manipulative organisations and this was a calculated, coercive abuse of power, lobbying and was nothing other than the usual bankers greed.

The fly by nights involved were all on short term bonuses so who cares about the fallout. TOUGH.

[Tonkers]

If I don't get a job soon I will be defaulting on mine. I would rather not.

What do my friends say? It isn't worth going bankrupt for such a small amount.

Strange.

[zebbedee]

Thank you for clarifying £6000 was a figure I was told but I suppose it tapers between the two figures....so would you recommend someone to repay their debt or even their mortgage if they have one from a redundancy payment?

Personally if I had debt and assets I'd clear as much as I can,why pay interest on a debt at level x and get interest on savings at level y=x-z, where z is a positive real and also lose out on benefits that you have paid for which up until that point have been feely given to feckless workshy layabouts.

Edit and yeh it does taper between the 6 and 16k. over 16k after 6 months and you get nowt.

Edited March 2, 2011 by zebbedee

[needsleep]

Unbelievable, so clearing debts isn't seen as a priority then when you've got no income?

No it isn't necessarily. All financial obligations are prioritised with rent/mortgage/utilities/council tax at the top of the pile and unsecured debt like CCs and loans at the bottom. You deal with the high priority obligations first and if there is any money left then you deal with the low priority obligations.

Using redeundancy money to pay off unsecured debt is an idiotic thing to do if you then don't have enough money to survive. The best thing to do is negotiate with the companies you owe money to and sort something out until you can fully meet your obligations again. CC/loans companies (in my experience of executing wills and helping other relatives out of financial bother) are usually pretty good if you engage with them. I've even managed to get substantial sums written off in some cases (e.g. a £19k unsecured loan) which going back to the points made in the original post is not so surprising once you understand the tax breaks companies enjoy for writing off debt and the fact that they most likely already got the debt repaid through bundling it into a security and selling it on. The real astonishing things are that they are so quick and eager to write off debt and that they are blatantly allowed to do it at our expense.