Lenders report fall in profits
Profits of the UK’s credit card companies have fallen by around 40 per cent over the past year, according to the latest statistics.
On average, lenders made an average of £24 per credit card issued last year, a decrease from the £27 annual profit per card recorded in 2005, making the UK the third-least profitable market for credit card companies.
In addition, the study carried out by the payments research firm Lafferty Group, overall profits in the UK credit card market fell by 43 per cent to £1.2 billion in 2006.
While profits are predicted to fall further over 2007, with total profits for the year of £1 billion expected, the market is likely to recover in 2008.
Part of the reason behind the falling profits is the recent ruling against excessive penalty fairs for late payments, which has benefited the borrower.
However, Lafferty also reported a rise in bad debts on credit card, with borrowers struggling to pay off the bills, highlighting the need for consumers to carefully consider the product they take out.