Credit card write-offs are at record levels
There has been a huge rise in the amount of money that banks are writing off as bad debts on their credit cards.
Bank of England figures show that the total value of the write-offs doubled to £1.6bn in the third quarter of 2009.
In each of the two preceding quarters, the figure had been about £800m. It totalled £3.2bn during 2008.
The figures reflect the impact of the recession and are an acknowledgement by the banks that the money will never be repaid by defaulting borrowers.
By contrast, the value of mortgages written off in 2008 was just £408m, and has averaged £260m in each of the first three quarters of 2009.
Much larger sums, running into many billions of pounds, are set aside each year by banks and other lenders to cover potential losses on credit cards, mortgages, overdrafts, and personal loans.
Only when the loss is crystallised as unrecoverable is the money finally written off.
"There was a one-off write-off of impaired credit card balances by one of the banking groups," said a spokesman for the British Bankers' Association.
David Black of the financial consultancy Defaqto, said that for the past four years, banks had been much more cautious about who they will lend to.
"HSBC, NatWest and RBS will only offer new credit cards or unsecured loans to their current account customers," he said.
"Banks also want to sweep bad news into one year's accounts to make future years look better," he added.
The figures help explain why interest rates are so much higher on credit cards, and other forms of unsecured loans, than on mortgages which are secured on borrowers' property.
The Bank of England's figures show that as of last November, the average credit card interest rate was 15.89%, while the average interest rate for a standard variable rate mortgage was just 3.98%.