Repayments rise may necessitate debt consolidation for many

Tuesday 10th November 2009

The number of bad debts has reached a record high, which could push up the cost of having a credit card, research by a leading accountancy firm has found.

PricewaterhouseCoopers found that the proportion of personal debts classed as 'bad' had reached an all-time high and warned that credit card holders should expect interest rate rises as a result.

High debt levels mean that the average household will spend approximately 15 per cent of its net income purely on servicing the interest payments arising from debt.

Additionally, since the start of the recession credit cards have become less popular, described as a "cooling passion" for plastic by Richard Thompson, a partner at the firm. Overall, the number of credit cards in circulation has fallen by eight per cent.

People in financial trouble who are struggling to pay interest on their credit cards still have a number of options available to them, such as debt consolidation loans and debt management plans.

The company predicts that bad debts could account for as much as nine per cent by the end of next year.

Mr Thompson commented: "Consumers do not fully appreciate the likely future changes to the market. As the recovery gains momentum, consumer demand for credit will return.

"Lenders will be unable or unwilling to increase supply sufficiently to match demand. This will leave consumers surprised at both the cost of credit and the difficulty in gaining access to it."

Last week, the Insolvency Service announced that record numbers were declared insolvent in the third quarter of 2009.

News article brought to you by Debt1 – Confidential Advice for Managing Debts

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