£3.64bn in bad debts was written off by credit card companies in 2011 according to figures from the Bank of England. This equates to a massive 7% of all the outstanding debts on people’s credit cards being deemed unrecoverable.
Although the figure is very high it is actually lower than the £5.32bn in 2012 and the £4.12bn in 2009. The writing off of credit card debt surged during the aftermath of the 2008 international banking crisis. The average between 2006 and 2008 was £3bn.
The rise in unrecoverable debt has made banks much more fussy about who they give credit cards to now. “Most of the major lenders have become very choosy in the last few years about who they will lend to with a card,” said David Black of Defaqto. “This makes it more difficult for many people to borrow, which in turn prevents them building up bad debts in the first place.”
Because of the inability to get a credit card a lot of people turn to short term loans such as payday loans to get by when they are strapped for cash. It is often not the first choice for many people but they have very few alternatives to raise cash at short notice. There is however a rising trend in people making use of short term cash loans for convenience.