Britain's credit card profits going down

Tuesday, May 22, 2007

Britain's credit card profits going down

A recent study carried out into credit card profits has shown that a combination of bad debts and lower credit card usage has left Britain's credit card industry in the bottom three globally when it comes to profitability.

According to the result of the study, carried out by the research firm Lafferty Group, profits on each credit card used in Britain on overage was just £16 last year, which reflected a slump of over 40%.

In the USA the average profit made on each credit card is around £24, and in 2005 the average profit made on each card in Britain came in at a healthy £27. However, as more and more people have become warier about using credit cards and spreading repayments, and the level of bad debt in the UK has soared, the profits on credit cards have quickly dropped.

According the study there was a drop of 43% in aggregate profits in 2006 compared to 2005 in the UK's credit card industry. Previously this was one of the UK's booming markets. However, the 43% drop reflects reduced profits of £1.2 billion for last year. And furthermore according to officials from Lafferty Group the profits will continue to fall this year to around £1 billion, and will not start recovering until around 2008.

Credit card companies have had to face a number of profit slashing changes over the past year. Financial regulators in the UK slashed the amount that card companies could charge by way of penalty fees to a maximum of £12 per fee, which has seen many card companies lose a hefty chunk of their profits.

Also bad debt levels recently smashed through the 100,000 barrier for the first time, with many people unable to continue with their regular repayments.

Source

http://www.cardguide.co.uk/news/200705/britains_credit_card_profits_going_down.html