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Credit Cards -
Capital One Suffering in Times of Growing Credit Card Debt - 15/04/2008
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Capital One Suffering in Times of Growing Credit Card Debt
Earlier this month, Capital One released information showing a 13.7 increase in the monthly charge off rate as compared to December 2007. Global credit card debt has continued to rise uncontrollably, in a way which many have predicted.
Capital One has worked hard to keep many loyal customers with offers of long lasting low rates, which are now causing the company some difficulties during the current economic atmosphere.
Rates which may have seemed high in previous years are now lower than the rates at which lenders can borrow at, causing alarm for the company.
With house prices down and repayments on mortgages rising, many are reaching for their old credit cards in order to pay for more everyday expenses, while spending is down as consumers worry about the economic climate.
In desperate attempts to recoup their losses and hang onto elusive profits, Capital One’s UK unit has been forced to reduce its workforce by a massive 40%.
With the economy as it is, Capital One’s monthly principal write off of £254,114,000, is simply not sustainable.
Andrew Horrowitz, Money Manager, has this to say: “Whether it is that consumers are not spending, food prices are increasing, job losses are mounting or markets are in utter disarray; companies that rely on revenue from consumer-generated debt are going to suffer.”
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