Insolvencies up, credit card borrowing harder

Next year will see an increase in insolvencies and a rise in the number of consumers turning to plastic to make ends meet.

However, the PricewaterhouseCoopers (PwC) Precious Plastic 2008 report reveals borrowing on credit cards will be more difficult in the coming year.

Pressures are due to come as the end of fixed-rate mortgage deals will see monthly repayments for homeowners up by £140 if they cannot remortgage.

Additionally, the average Brit now has debts of £33,000 – compared with £17,000 in 2000.

However, banks are due to tighten their lending criteria – as losses from the US sub-prime crisis and the resulting credit crunch make them more circumspect.

Consumers may now find securing a credit card in the run-up to Christmas could become harder.

"There are tough times ahead for both consumers and credit card companies," said Richard Thompson, PwC partner.

"Banks are continuing to take action in response to the rise in consumer debt by tightening their credit acceptance policies. Many consumers will find it increasingly difficult to obtain credit in the run-up to Christmas."

Consumers are also set to face annual fees for credit cards as standard – as firms look to increase lost revenue.

"It is only a matter of time before annual fees on cards becomes the norm," said Mr Thompson.

The PwC report also predicts growth in so-called green credit cards that offer environmental benefits, and contactless payment cards - with one in ten people regularly using a contactless card by the end of 2008.

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