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Tuesday, February 16, 2010

The Prostrate Cows

The UK credit card industry has long regarded their hapless customers as being akin to prostrate cows, ready and willing to be milked dry.

To some extent, given the appalling naivety of some customers when taking on debts that they cannot afford to pay, it is hardly surprising that the credit card companies hold this view.

However, the card companies are now charging rates that many could argue with some justification are simply "taking the piss" out of the prostrate cows.

Moneyfacts reports that interest rates on credit cards are now at their highest level for 12 years. The average rate charged is now 18.8%, despite the fact that the bank rate (ignored by the financial services industry, apart from when setting savings rates) is at a mere 0.5%.

The card companies, to some extent can argue that the rise in rates is as a result of the increasing levels of defaults. The Bank of England have published figures that show that write offs have doubled to £1.6BN in the third quarter of 2009.

Fair point, maybe.

However, did the banks and credit card companies not conduct a due diligence on their customers before granting them these loans?

Surely they are themselves partially responsible for their losses?

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