Credit Card Woes May Be Crossing The Pond

It seems that, as the credit crisis of the United States continues unabated, the country at the other end of the pond, the UK may be on its way to getting hit with it just as badly.

In the United States, the credit card crisis has already taken a toll to the tune of billions of dollars in losses for United States financial entities. The UK and other countries in Europe are also now bracing hard for what seems to be a repeat of what happened here in the US, defaults beginning to increase in numbers among UK credit card holders.

According to the International Monetary Fund, the estimated losses of the $1,914 billion US dollars consumer debt will be as high as 14%. Europe as a current consumer debt of $2,467 billion and the International Monetary Fund is predicting losses as high as 7%. A large part of those losses will be in the United Kingdom. It is known as the nation with the largest number of credit card borrowers in Europe.

The United Kingdom’s National Debtline has reported that the number of calls that they have been getting have dramatically increased. Calls from United Kingdom consumers worried about their mortgage, loan and credit card arrears went to as high as 41,000 last May. This is twice as high as the calls that National Debtline received in May of last year, 2008. What is even more troubling is that the calls are not slowing down.

Meanwhile, credit card defaults in the United States have continued to get worse for several months already. Major financial companies such as JPMorgan Chase, Citigroup, Wells Fargo and American Express have seen several billions of dollars in losses over the past few months, forcing the government to bail some of them out with tax payer’s money. Credit card industry losses has also outpaced the unemployment rate of the country making it much more difficult for credit card issuers to forecast future losses.

At the other end of the Atlantic, rating agency Moody is showing that the charge-off rates per annum of the UK had risen to 9.37% this May. This is a dramatic increase from the 6.4% rate of last year, May of 2008. Financial analysts in the country are also predicting an even higher number of defaults as the months continue. This is because of the rising unemployment levels of the United Kingdom resulting in worsening consumer insolvency.

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