Credit card application rejection rate still high

Recent reports have indicated that the level of borrowing on credit cards has been dropping over recent months, with more people opting for secured finance compared to credit card borrowing.

However, it may not simply be consumer choice that has led to this drop in credit card borrowing, as recent research reveals that the level of approvals on credit card applications is quite high, which may have resulted in some consumers having to turn to secured finance rather than doing this through choice.

According to recent figures lending companies turned down nearly three million applications for credit cards last year. This comes in the light of huge levels of bad debt that are currently being dealt with by credit card companies and other lenders. Britain's largest credit card provider Barclaycard lost around one and a half billion pounds in bad debts last year alone.

One official from MoneyExpert stated: "Credit card companies have been badly burnt with bad debts and are putting the shutters up in response by turning down more and more applications. Rising interest rates mean it is harder to service debts and people should not be encouraged to get deeper into debt."

The age group that suffered the highest level of rejections was the twenty five to thirty four year age group. MoneyExpert officials also added that banks were ding the sensible thing by turning down applications from those already suffering financial problems or those that were likely to struggle with repayments based on a financial assessment.

The rate of rejection for the majority of Britain was around six percent, but was slightly higher in London at eight percent.

Tom Smith
6th April 2007