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Why Is The UK Credit Card Market Contracting?

News of job loses at HBOS was widely expected but the closure of the Intelligent Finance (IF) division was something which few had forecast, at least in the short term. The closure has seen HBOS reduce its exposure to the credit card market at a time when competition needs to be increased not reduced. So what it happening to the UK credit card market?

The UK credit card market has for some years been one of the more competitive in the world but the last 12 months has seen more and more major financial institutions step back from the arena, at least in the short term. It all started when Egg decided to call in the balances of a number of UK credit card customers and inform them that payment in full was expected in the short term.

This very much set the tone for the industry and this seems to have continued over the last few months, but is this the start of the end for the UK's long term love affair with plastic or just a period of consolidation?

Even though UK credit card debt has never been higher and many banks have been stung of late this is highly likely to be a short term situation. The fear and greed scenario will come back into play when the economy picks up and the UK returns to anywhere near normal levels of economic activity. Until then there may be a lack of depth to competition in the marketplace.

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