Credit card rates set to rise
UK consumers face higher interest rates and fees on credit cards as increasing bad debt, lending constraints and tough economic conditions render lenders’ business models “unsustainable”, according to PricewaterhouseCoopers.
The accountancy firm says it expects “large scale change” within the sector in the next few years with APRs set to increase and annual fees to become a “common feature” in the future.
It adds high-end customers will pay for access to premium benefits and at the lower end “more marginal customers” will be expected to pay for even a standard credit card.
PwC says that despite UK household borrowing remaining “broadly constant” over the last 12 months, “they still remain noticeably high in comparison to the rest of Europe” with each UK household averaging £60,000 of debt.
The firm says this means each household will need to spend approximately 15% of its net income to service the interest payments arising from their debt.
In addition, PwC argues that the introduction of further industry regulation adds to the pressure on lenders.
The firm says consumers will be presented with more options through contactless cards, prepaid cards and mobile payments as a way of “repairing the credit card business model”.
““We’re likely to see credit cards being reinvented as payment rather than borrowing tools,” it says.
