Independent Report Shows Credit Card Companies Are Suffering
A recent report into the UK Credit Card industry has shown a sharp fall in profitability for the credit card providers, many of whom have been hit by bad debt provisions. It appears that 2006 was a bad year for the industry with the profit per card falling 40% to “just†£16 in the UK.
This is surely just what the credit card industry were looking for, with rumours abound that they will all introduce annual charges in 2007. Before we begin to worry about the industry, let us not forget that the sector still made profits of £1.2 billion in 2006, and while this is expected to fall to £1 billion in 2007, a rise is forecast for 2008 and onwards.
The UK has long been known as one of the most competitive and potentially lucrative credit card markets in the world, but last years slump has seen the UK fall into the bottom third of the worldwide profitability league table. In comparison the US has faired much better, reporting average profits of £24 per card for 2006 - although they may see a more difficult 2007 with the US economy finally balanced.
There is no doubt that bad debts will get worse before they get better, and it seems that the industry now has a perfect “short term†reason for introducing annual charges. Quite how customers will take these charges, as well as rising interest rates (in line with the base rate), is another matter - but as ever it will become more vital to shop around for the best deal for you.
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