September Sees UK Credit Cards Holding

Credit card companies have been seeing a higher rate of default this year, due to the credit crunch, but it seems the market has finally begun to change since September. The month of September saw a steady performance from all the UK credit card companies. It seems that the default rates improved during September with the rate lowering from 6.16 percent to 6.03 percent. The credit card companies believe this decrease in default rates is largely due to their effort to help customers. Most of the credit card companies have improved their servicing and underwriting procedures. They also believe that the decrease in defaults is due to the change in the market.

Analysts have seen a change in the economic market in September, and they hope it will continue through the next few months and into the new year. The economic market, while it hasn’t improved has not gotten worse for the month of September. Instead the market seems to be in a benign position. As long as there are no changes in the market for the worse it is possible that the credit card companies will continue to see falling default rates, rather than increased rates.

There are other things to consider with the improvement of credit card companies and their new procedures. The charge off rate has also seen improvement. The charge off rate for the month of September was 6.50 percent which is down from 6.88 percent during the earlier part of the year. The charge off rate increased largely because of the Individual Insolvency Agreement from 2003 and 2004. It seems that the charge off rates are finally coming to a settled level, rather than moving up.

Not all has been good for the credit card issuers, however. The payment rates and gross yields have decreased in the month of September compared to other months. The payment rates decreased, by 166 basis points, on the month- to- month analysis. A possible reason for this is the lower number of business days in September, which means there were less days for the consumers to make payments. The gross yield for the companies was 18.67 percent.

Despite the outlook during the year the UK economy managed to grow about .7 percent during each quarter, yielding a 3.2 percent year- on- year growth in the third quarter. The outlook for the new quarters to come is not positive. Most believe that the economic growth for credit cards has reached its peak. This means that the numbers may remain steady or at the worst slide back down. It seems that analysts are predicting that economic conditions will deteriorate with an increase in interest rates for both the base and LIBOR rates. This increase will weaken the economy, especially the financial markets and offer a weaker employment status for many in the UK. The housing market is also going to see a decline. The credit card companies are going to have to watch the charge offs because they may be seeing only a temporary improvement if the economy weakens again.

Back To Financial News December 2007

All About Prepaid Credit Cards
4.4 Million Still Paying for Last Christmas
Higher Credit Card Fees for UK Customers
September Sees UK Credit Cards Holding
Ways to Avoid Overspending at Christmas
What Factors Come In To Play When You Apply for a Credit Card
Draft Guidelines for Recovery Agents
Opt For Debt Consolidation
Adverse Borrowers Need to Act Now