The bell is tolling for the the easy availability of credit cards and relaxed
credit limits that we have enjoyed in recent years.

The Financial Times [FT] reports that card companies in Europe are bracing
themselves for a rising wave of consumer debt defaults as the credit card crisis
that has caused billions of dollars in losses among US banks spreads across the
Atlantic.

The International Monetary Fund estimates that 7 per cent of the £1,499 billion
[!!!] of consumer debt in Europe will be lost, with much of that falling in the
UK, the continent's biggest nation of credit card borrowers.

UK National Debtline says that number of calls it had received from UK consumers
worried about loans, credit cards and mortgage arrears had reached 41,000 in May
– double the 20,000 calls it had received in the same month last year.

In the USA, credit card defaults have been rising for months as a spike in
unemployment and the most severe economic downturn since the Great Depression
took their toll on overstretched consumers.

Analysts expect further defaults as UK unemployment rises and personal
insolvencies, which reached 29,774 in the first quarter of the year, continue to
increase.

The falling UK housing market and more stringent lending requirements by banks
has also meant that indebted consumers can now no longer rely on withdrawing
equity from their homes to pay off other debts such as credit cards or unsecured
loans

Barclays, the UK's biggest credit card lender with 11.7m UK customers through
Barclaycard, said in May that UK credit card delinquencies had increased in the
first quarter of the year, reflecting adverse economic conditions and rising
unemployment.

As a result it had reduced credit limits and tightened approval rates for new
credit cards [now running at less than 50 per cent in March].

The days of easy credit are drawing to a close!


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[this posting is based on FT data and reports]