Payday loans soar due to credit crunch

Payday loans have been at the centre of controversy for some time, and this is largely due to the high rate of interest charged by these lenders on an annual basis. However, some have argues that these lenders receive unnecessary bad press, because the interest charged is not that much providing the loan is paid back in time, and some officials argue that these loans can be very useful for those that desperately need short term financial help.

It has now been reported that the level of payday loans being taken out has soared partly as a result of the global credit crunch, which has left many people short of cash and in financial dire straits. In the space of four years the number of people taking out these payday loans is said to have quadrupled, as more and more people find themselves desperate for cash for a short term period.

The APRs that some of these payday lenders charge has caused a lot of concern over recent years, but for those that only borrow for a short period and repay the loan on time rather than rolling it over the cost of borrowing is not as bad as it sounds. Some charity officials have said that it is preferable for consumers to go to payday loan companies for short term loans to tide them over rather than unscrupulous loan sharks.

Whilst there have been calls for these loans to be banned officials from Consumer Focus said: ‘These products are controversial, but we don’t agree with calls for them to be banned. Outlawing payday loans could leave some borrowers vulnerable to illegal loan sharks. Instead we need sensible safeguards now to stop borrowers becoming dependent on this high cost credit and prevent even more stringent controls being needed in the future.’

What to look for with a personal loan

Whilst credit conditions have undoubtedly been strained over the past couple of years many believe that things are now easing up in the financial markets, and whilst lenders have not gone back to the days of easy credit the availability of loans and finance does appear to be easing up to some degree.

With this in mind many people may now start to think about taking out a personal loan for a variety of purchases, and with things easing up in the financial markets the choice of personal loans is greater than before, and there are some pretty good deals available for those that have a decent credit history and score.

There are many lenders that offer personal loans, and which cater for the needs of a wide range of people and needs. It is important for those that are looking for a personal loan to do some research and familiarise themselves with the different loans and deals available so that they can make a more informed choice when it comes to deciding which of these loans to opt for.

It is easiest to use the internet to browse and compare the different personal loans available, as this will allow you to quickly see which loans fit in with your needs and your budget without having to deal with any pushy sales people or feel embarrassed about going through your finances with someone on the phone or in person.

There are a number of key areas that you need to look at when browsing personal loans with a view to taking one of these loans out. The interest rate that you will be charged is a very important consideration, so this is something that you need to compare. However, do bear in mind that if a lender advertises a typical APR this does not mean that you will necessarily get that rate of interest but that most of the lenders customers get that rate.

The repayment periods on personal loans can vary from one provider and loan to another, so this is something else that you need to look at when you are deciding which loan you should go for. If you want to keep your repayments down then you need longer repayments periods, so make sure that you know what’s on offer.

Other things that you need to look at include the overall monthly repayments to ensure that you can afford the repayments, the eligibility requirements, the terms and conditions of the loan, and the borrowing limits, although this will vary based on your financial status.

Getting better information on credit in current economic and financial climate

The global financial crisis and recession has had a profound impact on the lives of many people in terms of finances, and one of the areas that has been deeply affected by the economic and financial climate over the past couple of years is the financial sector. Read more

Problems with loan sharks being tackled by specialist team

A specialist team is dealing with problems relating to illegal loan sharks, with officials from the team expressing concerns about the number of people that are falling for illegal loan shark finance due to desperation in the current financial climate. One official from the illegal money lending unit covering North Staffordshire said more people were turning to these lenders as a result of the effects of the recession.

The global credit crisis has resulted in credit drying up for many people, making it difficult for them to get the finance that they need, and for many desperate times has led to desperate measures, forcing them to turn to less reputable lenders when it comes to borrowing money.

The problems relating to loan sharks are now being tackled by the Central England Trading Standards Illegal Money Lending Team, which was launched back in 2004. The team is funded by the government and is responsible for gathering evidence on loan sharks.  

As part of their investigation into the practices and activities of loan sharks the team has set up a twenty four hour hotline that allows consumers to ’shop a shark’ and give the team more ammunition when investigating these loan sharks.

As a result of the hotline the investigators recently managed to catch out one loan shark and get him sentenced. The team hopes to be able to catch out many other loan sharks through the hotline.

An official from Staffordshire County Council, where the sentenced loan shark was from, stated: “We hope this sends out a strong message to anyone thinking they can make money illegally. These people prey on vulnerable residents without any remorse which is thoroughly shameful.”

Virgin Money makes changes to repayment system

Many Virgin Money credit card customers have been pleased to hear a recent announcement from the financial giant with regards to the repayment allocation on its credit cards. Virgin has announced that as of the start of September any repayments made on the Virgin credit cards will be allocated to the more expensive debt first, which could potentially save credit card holders a fair amount in interest.

Under the current repayment system, as is the case with many credit card providers, anyone that repays their debt gradually on the Virgin credit cards will see the repayment being out towards the cheapest debt first, which is often interest free debt. This means that more expensive debts that have high interest rates can be left to faster and continue accruing interest, which means that customers often end up paying out more.

The move to make credit card providers allocate customers’ repayments in this way has been pushed by regulators and financial authorities in the UK following similar moves that were taken in the United States. However, whilst lenders who offer credit cards will have to adopt these measures eventually many have surprised customers by bringing in the moves earlier than was necessary.

Virgin Money has become one of a number of credit card providers to bring in the changes to the allocation of repayments earlier than they needed to, and collectively customers could save a huge amount on interest as a result of these changes being made early.

One customer said: “I think its great that Virgin have decided to take this action early, because it will allow customers to save a fortune on the interest that they would otherwise have to pay.”

Fall in lending to businesses seen in May

According to recent reports the level of lending to UK businesses fell in May, despite efforts from industry groups and the government to try and boost lending by banks to businesses. Whilst the level of mortgage lending in May improved compared to the previous month the level of business lending took another hit.

The figures have been released by the British Banker’s Association. The level of lending to private, non-financial companies is said to have plunged by £1.3 billion in the month of May, which was slightly higher than the fall seen in April but slightly lower than the average decline seen over the past six months.

These businesses are said to form the backbone of Britain’s economy, and many have highlighted the importance of enabling these businesses to borrow the money that they need. However, banks are still being very cautious when it comes to lending, as many are still reeling from the financial meltdown.

In addition to this the falling demand for finance from these businesses is also affecting lending levels, and many businesses are loathe to take out costly loans and finance in the current climate. With fewer businesses wanting to take the financial risk of borrowing more money demand levels have fallen and subsequently so have lending levels.

Officials have also said that there has been an increase in retail sales, with the higher property sales levels now impacting upon the retail sector. Household goods and furniture retailers were said to have seen improvement, as did grocery retailers who may have benefitted from people stocking up for the World Cup.  Electrical retailers also benefitted as a result of people buying new television sets in preparation for the World Cup.

Exercise caution when looking for a non-traditional loan

These days many people are looking to get finance or credit of some sort, but because of the difficult financial climate and the increased caution being exercised by lenders many are finding it increasingly difficult to get the finance that they need.

As a result of this there are many borrowers that are turning to less traditional means of getting credit or raising finance, and whilst some of these options can prove useful and helpful for consumers industry officials have warned that caution should always be exercised to ensure that the deals that are available are fair and affordable.

There are a number of options available to those that need to get money but cannot afford to get credit from traditional lenders. However, before jumping in and taking up one of these options it is important for consumers to consider the cons as well as the pros, and to ensure that they are not getting ripped off as a result of the transaction.

One of the options that people might use when they are unable to get traditional finance is a payday loans company, which offer short term loans to tide borrowers over until payday. The APR charged on these loans can be very high. However, most will charge a fixed fee such as £10 per £100 borrowed and if you are only borrowing over a short period this may be an affordable option. Most do not carry out credit checks either, although proof of income must be provided. If you are considering a payday loan make sure that you check a few and compare the fees and charges so that you can get the best deal.

Another option that many people might look at is to get cash for gold, with a plethora of advertisements trying to tempt consumers to send in their gold jewellery in exchange for cash. However, many reports have claimed that the consumer often only gets a fraction of the value of the jewellery when doing this so you need to make sure that this is a viable option for you and don’t let yourself get ripped off over how much you are paid for your jewellery.

Finally, many people that cannot get mainstream finance may be tempted by doorstep lenders, and more worryingly loan sharks. You should bear in mind that with doorstep lenders you may be charged an extortionate rate of interest, which could be financially crippling. When it comes to loan sharks you should always avoid them and look at alternatives, as these are unregulated and often unscrupulous lenders, and you could end up in very hot water by borrowing through them.

Consumers saving more and using credit cards less

Recent reports have shown that consumers are getting far savvier about their finances, with many now choosing to save money and shore up their finances rather than splashing the cash on large purchases or spending ruthlessly on their credit cards. This indicates that consumers have become more accustomed to the fact that they need to save money to help them through in the current climate and that they have to be more mindful about their spending.

Prior to the global credit crisis and the recession many of those that are now saving their money may not have thought twice about using the money to purchase big ticket items, splash out on luxuries, and spend on items that they didn’t really need. Likewise, many may not have given a second thought before going out armed with their credit card and treating themselves to pricey luxuries.

However, over the past couple of years many people have realised how important it is to have money put aside to help them through in the event of a financial emergency or if they lose their jobs. With this in mind more and more people are putting money aside and avoiding spending unnecessarily. According to reports a rising number of people are also trying to pay off their debt so that they can be more financially secure in the future.

A spokesperson from ING Direct, which released the report, said that many people were now trying to get over the debt that they accrued over the Christmas period and were focussing on saving or repaying their debt.

He said: “We are also seeing a trend, which is getting stronger and stronger, that people start saving before they make big purchases and use their credit cards less and less.”

Getting a good deal on a personal loan

Over the past couple of years the availability of personal loans has become somewhat restricted, and the global financial crisis and recession have made it difficult for many people to get a good deal on personal finance. However, the market is now starting to ease, and this means that whilst personal loans are by no means being dished out like smarties, as they were in the days before the credit crisis, it is a little easier to come by a good deal on a personal loan than it may have been a year or so ago.

These days people use personal loans for all sorts of purposes, and if you get the right loan this can be a great way to fund a range of things that you may want. Whilst the use of personal loans for debt consolidation has fallen over recent years many people use these loans for things such as improving their homes, buying a new vehicle, paying for a wedding, or even funding a dream holiday.

Your ability to get a low cost personal loan will depend on a number of factors, including your credit history and rating. Those with good or excellent credit should be able to find a low rate personal loan without any problem, whilst those with a tarnished credit history may find it difficult to get a personal loan or may have to pay a higher rate of interest because of the increased risk they pose to the lender.

In order to get the best deal on a personal loan you need to make sure that you compare the deals on offer, as this will boost your chances of finding a loan that comes with affordable repayments. You can compare loans quickly and easily online, and using a comparison site could help to save you time as you can check out a range of personal loans and providers at a glance.

When you are comparing personal loans there are a number of things that you need to look at to check the suitability of the loans. You should check out the interest rate on the loans, as this will determine how much you repay on the loan. Also, compare the repayment periods available, as this will give you an idea of how much you need to repay each month. Always ready the terms and conditions of the loans to check on any penalties or extra charges.

Recreated paperwork could cause problems for borrowers

According to a recent report many lenders tend to misplace or lose loan and credit agreements, and in some cases this paperwork is even disposed of, which means that if and when the banks need to refer to the agreement for any reason they are having to recreate the agreement. Whilst this is not frowned upon there is one problem that has been highlighted, and this is the fact that the recreated document often has discrepancies that leave the consumer even worse off. Read more

Credit card companies to start targeting high earners again

Whilst there has been something of a credit boom in the UK over the past decade, prior to this boom it was not unusual for credit card firms to focus only on wealthy, higher earners, leaving those on lower incomes out in the cold when it came to getting credit. In fact, seeing someone open a purse or wallet with a string of credit cards suggested that the person was well off and earned good money. Read more

False sense of security for consumers being asked for minimum repayments on credit cards

Experts have recently expressed concern that many credit card customers may be getting lulled into a false sense of security as a result of credit card companies asking for very low minimum repayments on their credit card balances. Read more

Economic recovery depends partly on continued lending

The deputy governor of the Bank of England, Paul Tucker, has recently spoken out about the future of the UK’s economy, and has stated that in his opinion the future of the economy partly depends on continued credit being extended by lenders. Read more

Economists give views on where interest rates will go next

There was a sigh of relief across the UK earlier this week when the Bank of England announced that interest rates had been cut by 0.25% from 5.75% to 5.5%.

There are now mixed predictions with regards to what will happen with the interest rate next, with some predicting that 2008 will see another one or two interest rate cuts and others believing that the interest rate could fall as low as 4% in 2008. Financial experts from This is Money interviewed some economists to get their views.

An official from Investec stated: ‘Evidently the MPC is taking much more note of recent signs of a slowdown in the economy and its fears over the possible effects of the credit squeeze have begun to crystallize. The question obviously now is whether rates come down again and if so how quickly. The outlook is very uncertain. We are pencilling two further 25 basis-point cuts over the first half of next year.’

Roger Bootle from Deloitte and Touche stated: ‘Today’s decision by the MPC to cut interest rates from 5.75% to 5.5% is the first step in a prolonged period of monetary easing that could see rates fall very sharply. I previously thought that rates would drop to 5%, but I now think that they could eventually be cut all the way to 4%. Inflation is likely to rise further in the coming months. However, the rise in interbank interest rates means that the risk of a very sharp and prolonged economic downturn is growing by the day.’

A spokesman from Bear Stearns said: ‘We expect another cut in January, with rates to target 5% by the second quarter. UK rates should be at 4.5% by the end of 2008, possibly even lower if the downturn is more severe. This has been a cut to alleviate the credit crunch and provide a rescue remedy for growth. Lower rates should help to put a prop under the UK housing market.’

Tom Smith
10t December 2007

‘Tis the season to avoid store cards

As Christmas continued to get nearer and nearer experts have been warning consumers across the UK to avoid the temptation as taking out a store card, as this could lead to high levels of debt and real financial difficulties once the festive season is over.

With December upon us millions of shoppers are hitting the high streets and shopping malls to get their gift, clothes, and other Christmas goodies, and many retail staff are just waiting to pounce and talk vulnerable consumers into taking out a store card.

Store cards are fine for those that will repay their balance in full each month, thus avoiding any interest charges, but many experts state that consumers would be far better off with a rewards based credit card, as you can still avoid paying interest by repaying the balance in full each month, you can still enjoy benefits in the form of rewards, and you have the luxury of choice, as you can use the card in any shop rather than only at a specific shop.

However, the real problem is with those that do not repay their balance in full, as store cards charge very high rates of interest, and the interest that you will pay on any outstanding balance will by far exceed any rewards and discounts that you receive. Therefore those that wish to spread repayments on their Christmas spending are strongly advised to opt for a 0% purchase credit card in order to avoid paying interest rather than an expensive and restrictive store card.

One industry official stated: ‘With storecards the advice is simple: Don’t use them, avoid the gimmicks, don’t be lured in. Invariably people forget about spending on their plastic, or they use credit precisely because they know they won’t be able to repay the debt immediately. Under those circumstances there is no more expensive form of borrowing than a storecard. The discounts can be attractive, and some storecards offer 0% deals if you spend a lot of money in-store. So if you’re adamant you need a storecard, ensure you make the most of it by keeping up to speed on all the incentives on offer.’

Tom Smith
1st December 2007

The importance of keeping your credit clean

Over the years more and more of us have become reliant on credit for the things that we need in life, whether it is a new home or a new car or whether it is to fund a wedding, and education, or even a luxury holiday.

Most of us would be lost without our credit cards, and the majority of us take the ability to be able to open a current account for granted. Yet, if you find yourself facing severe credit problems you could find all of these things impossible, leaving you to deal with a very bleak and difficult financial future.

This is why it is so important to keep your credit in good shape. Those with good credit can enjoy a far easier financial future, with access to a choice of financial services and products from a wide choice of lenders. People with good credit can get the best interest rates, making it more affordable to take out finance. Whether you are looking for a mortgage, a personal loan, a secured loan, a credit card, a store card, or any other type of finance you will find that having good credit can make a huge difference to the amount you pay on your borrowing – and whether you are even eligible to get the credit that you need.

Your credit can be affected in a number of ways. Firstly, it is important to remember that having no credit rating can be as bad as having a poor credit rating, as it means that lenders have no way of knowing whether you are going to be a viable risk when it comes to taking out finance. Therefore, it is important to kick start your credit as early on as possible. One thing that has a major effect on your credit rating is your repayment habits – those that pay their bills and debts on time, regularly, and for at least the amounts requested will enjoy a good credit rating and access to some great deals on finance.

If, however, you make regular late repayments on your financial commitments, or worse still you default on your financial obligations, you will find that your credit rating rapidly declines, and this is where you will start experiencing problems. Those with poor credit will find that their access to finance is greatly reduced, and many lenders will not take risks on those with damaged credit, particularly in the current economic climate. Those with very bad credit may find that they cannot get any form of unsecured finance, and will have to rely on credit that is secured against their homes – even then the interest rates charged are likely to be very high.

There are other factors that can adversely affect your credit, such as fraudulent activity, out of date information, or mistakes on your credit file. This is why it is advisable to order a copy of your credit report on a regular basis and checking through the information on the file. You may find that there are mistakes and inaccuracies that could having an adverse effect on your credit, out of date information that needs to be updated, or even suspicious transactions that could result in your credit rating taking a knock. If you pick up on anything like this you should contact the credit reporting agency as early on as possible to get it rectified.

You should also bear in mind that a log is made on your credit file each time you apply for finance, and the more rejected finance applications that are logged onto your file the more your credit rating will suffer. Therefore if you are turned down for finance you should resist the temptation to keep on making applications. Instead, try and find out what may have affected the lender’s decision by going through your credit report, and wait at least three months before you make another application.

Related articles:

• How To Build Up a Good Credit Rating
• Credit Building Tactics

External links:

• Credit Reports
  Every time a customer applies for a financial product such as a credit card, the credit company will consult that customer’s credit file. This file records all their financial activity in terms of credit applications and banking activity.
• Credit Cards Designed To Improve Your Credit
  Credit cards have become very popular over the years because of the ease, convenience, and flexibility that they provide, and these days there are many different types of credit card available
• Applying For Credit Cards When You Have Bad Credit
  For those with a poor credit score, getting a credit card is harder. However, there are solutions and we will discuss and offer these in the article.
• Using Your Credit Card To Build Credit History
  Let’s say you want to buy a house, but you need to get a mortgage to help pay for the house. However, you have no credit history to speak of, so how can you apply for the mortgage to get your dream home?

Payment Protection Insurance Cover

Anyone that takes out finance likes to have the peace of mind that they are protected against situations that could render them unable to make repayments, and payment protection insurance cover is an effective way to do this. Read more

Organising your spending money when going abroad

When you are jetting off abroad there is a great deal to try and think about and organise – it can be easy to forget about something as simple yet important as sorting out your spending money.

However, it is important to organise your spending money properly when going abroad, otherwise you could face security issues or costly charges that could put the dampeners on your holiday. It is best not to rely on any one particular source for your spending, and there are a number of options that you should look at to fund your spending whilst on holiday.

Most people benefit from taking a combination of cash and traveller’s cheques when going on holiday in order to ensure that they increase security for themselves. It is a good idea to take a credit card along as well for emergencies. If you take just cash on holiday with you and your money then gets lost or stolen, you could find yourself without any comeback, and you could be stranded without any money of means of paying for anything. This is why it is important to take a smaller amount of cash rather than relying solely on cash for your holiday spending.

Of course it is important to take a small amount of cash. This includes English currency for when you are travelling to and from the airport or departure point, and for any purchases you may want to make whilst at the airport/ferry port/departure point. You should also take a small amount of cash in the currency used in the destination to which you are travelling for things such as cab fares when you arrive and any smaller purchases you may wish to make on your first day before you have got yourself organized.

Most people prefer to take the bulk of their spending money in the form of traveller’s cheques, which are available from banks, post offices, and other foreign currency providers. You can get traveller’s cheques in Sterling as well as in other currencies. Although it can take a little longer to make a purchase using a traveller’s cheque instead of cash, you have the added security that you can quickly get your cheques replaced in the event that they are stolen or lost, although you should remember to note down the cheque numbers and the contact details for replacement sot that you have these details to hand whilst you are away.

Taking a credit card along for emergencies is another good idea. However, if possible you should avoid using your card unless you really have to, as you could find that the charges imposed by credit card companies for each transaction made can quickly add up, and you could have a shock when your statement comes through. In particular you should avoid using your card to make cash withdrawals whilst abroad, as the combined charges for making even one withdrawal a day can be very high.

Be careful about becoming the victim of credit card or debit card fraud whilst abroad, as recent reports have suggested that Brits have seen a rise in card fraud whilst abroad. Always be vigilant when you do use your card, and if your card goes missing make sure that you report it right away so that the account can be frozen to minimise on any fraudulent transactions or theft carried out using your card.

ICICI to expand in UK

Indian bank ICICI is planning to expand its operations in the UK, offering consumers the chance to take out personal loans, current accounts, and insurance services.

The bank is planning to expand its services over the next year. In addition to expanding operations the company has stated that it will also improve on the time it takes to respond to customer queries, which currently takes between 24-48 hours.

ICICI is a subsidiary of the second largest bank in India, and was established in 2003. It has enabled consumers in the UK to enjoy excellent rates on savings accounts, and due to its high rates on savings has gained popularity amongst consumers in the UK. However, one thing that has gone against the bank is that many consumers have never heard of it and therefore have avoided it despite the high rates of interest offered on its HiSave Account.

Until recently the bank had refused to sign up to the Banking Code in the UK, and consumers were concerned about this as well as the bank’s reputation when it came to dealing with customer complaints and queries. One official from ICICI stated that the reason that it had not signed up to the Banking Code previously was because its bank cards were not yet chip and pin compliant.

One official from the bank stated: ‘The major obstacle was that our cards weren’t compliant. Customers can now change their pin numbers as they like and, as our systems have become more automated, we have cut down on the time it takes to open a new account to bring it in line with the industry average.’

Alan Wright
15th November 2007

King advised Darling not to lend to Lloyds

The Governor of the Bank of England Mervyn King has spoken out about his advice to the Chancellor of the Exchequer with regards to a loan request from banking giant Lloyds TSB.

The high street bank had approached the Bank of England for a loan to the tune of £30 billion in order to fund the takeover of Northern Rock. However, the governor advised the chancellor not to authorize the loan, which Lloyds wanted to take out over two years at competitive rates.

According to Mr King he told Darling that the Bank of England should not be providing loans to a company in order to allow the takeover of another company.

Speaking on Radio 4 Mr King stated: “I said to the chancellor: ‘This is not something which a central bank can do. They don’t normally finance takeovers by one company for another, let alone to the tune of £30bn, which is rather a large amount of money’.”

When speaking on Radio 4 Mr King also added that it could take months before banks get back to normal following the effects of the credit crunch.

He stated: “I think most people expect that we have several more months to get through before the banks have revealed all the losses that have occurred, and have taken measures to finance their obligations that result from that, but we’re going in the right direction.”

He also added: “There is always, in a period like this, the possibility that a shock from outside the UK, one from the world economy, might create further fragilities, but to some extent there are always risks, there are always fragilities. What I would say is that the situation now is, in my view, different from that in August, though it’s not without risk.”

Tom Smith
15th November 2007

Financial regulators are ’sleeping on the job’

A debt charity in the UK has accused financial regulators of being ‘asleep on the job’ stating that many consumers in the UK are being pushed into soaring levels of debt by irresponsible lender but that regulators are failing to take the necessary action.

According to officials from the Citizen’s Advice Bureau, which deals with many debt related issues, there have been over 1.7 million debt related issues to be dealt with by the bureau over the past year, which reflects a rise of 20% on the previous year.

Officials state that although the CAB is doing all that it can to help consumers deal with their debt related issues, it is up to financial regulators to try and tackle irresponsible lending in order to tackle soaring debt levels. The charity is currently embarking upon a conference to help consumers to deal more effectively with money issues, and this problem has been highlighted as part of the conference.

One CAB official stated: “Time and time again, we come across people in desperate straits who need not be there if the firm who lent them money had acted responsibly on day one. And while some regulators have taken action on scandals like the mis-selling of payment protection insurance, others seem to be asleep on the job.”

The Cab says that rising debt is one of the major issues facing the economy and that action must be taken by the financial services industry to combat the problem.

According to recent data spending on plastic has rocketed by nearly 50% since 2002, and in 2006 Brits spent around £511 billion on credit, debit, and store cards. However, figures from the Bank of England show that there has been a steady decline in the amount owed on credit cards since the start of 2006.

Alan Wright
14th November 2007

Competition Commission still investigating PPI

The controversy over payment protection insurance has been going on for some time now, and regulators have been investigating the problems surrounding the sale of PPI after it was found that many consumers were being mis-sold this insurance, and that in some cases the cost of PPI was higher than the interest costs on a loan.

The Competition Commission has stated that its investigation into PPI is still ongoing as no conclusions have yet been reached.

The Competition Commission has stated that the issues that are being considered are complex and therefore more time and consideration is required. The Competition Commission plans to publish its provisional findings in May of next year. The chairman of the inquiry stated that the Competition Commission had already reviewed a substantial amount of evidence, but added that there were areas that needed to be looked into further.

The chairman stated: “We are far from making up our minds. But we are focussing on the amount of competition for PPI that distributors face at the retail level.”

He added that the Competition Commission was aiming to complete the inquiry as soon as possible but had to take into consideration areas that needed to be looked at further. He said: “…we are also conscious that the issues we are deciding upon are by no means simple and it is vital that we carry out our work thoroughly, ensuring that all parties receive a fair hearing.”

A number of issues relating to PPI are being looked into by the Competition Commission. This form of cover is designed to protect against falling behind on repayments on loans, credit cards, and other forms of finance.

Alan Wright
13th November 2007

Switching and saving is easier than ever

There are many different ways to try and save money on your monthly outgoings these days. You can go through your income and expenditure, and try and cut back on luxuries and money spent on social events. You can also go through and cancel any unused subscriptions, such as gym or magazine subscriptions that you don’t really make use of. Read more

Using the Internet to find affordable finance

There are many different types of finance available these days for those with good credit and those that own their own homes. Read more

Loans ‘good’ for debt consolidation if used wisely

People considering taking out a personal loa as a means to manage their finances are advised it is sensible if done sagely.

According to Moneyextra.com, if consumers are going to use this means to tame their finances, they must be careful not to build up debt on an overdraft or credit card at the same time.

Robin Amlot, senior editor at the financial services company, explained that debt consolidation is the “key reason” people chose to take out personal loans these days.

He advised a course of action for those doing so, saying: “Two key factors about taking out an unsecured personal loan as a way of consolidating your debts is that you are fixing your interest rate – so you know what you’ll be paying each month – and you are fixing a date in the future at which you will have cleared the debt.”

Recent research by Thomas Charles debt consultancy in association with YouGov found that 15 per cent of people in Britain are in serious debt, with men being more indebted than women overall.

Meanwhile, one in four Britons plan to avoid spending money on credit cards this Christmas.

Credit cards hit by widespread rate increases

Over 120 increases in rates and fees have hit the UK’s credit cardmarket.

According to Moneyfacts.co.uk, in the past two months, cards have felt the indirect impact of the sub-prime mortgage crisis that has led to a global credit squeeze and resulted in rising charges.

The website’s research has found that cash withdrawal fees have increased on 69 cards, 25 now have higher rates on cash withdrawals and foreign usage charges have spiralled on 18 cards.

Esther James, credit card analyst at the website, said: “Following a year of rising rates and fees, its time to take a look at your card. Check the interest rate you are paying, as there are still some great 0 per cent deals on purchases and balance transfers to be found.

“So don’t pay interest unnecessarily. Make sure you look after your own pocket instead of fuelling the profits of the card providers.”

She added that there is enough choice for consumers not to be caught out, with 300 credit card providers on the market.

FSA to publish new PPI guidelines

The UK’s financial regulator, the Financial Services Authority, is to publish new guidelines in relation to Payment Protection Insurance on its website next year.

Payment Protection Insurance, or PPI, has been at the centre of controversy over the past year, with many claims that this type of insurance was being forced onto borrowers, mis-sold, and in some cases added onto finance deals without the consumers even knowing about it. Banks and lenders make a lot of profit on the sale of PPI, but in many cases customers end up with expensive policies that they cannot even benefit from.

Payment Protection Insurance is designed to help those taking out finance, such as credit cards, loans, and other forms of credit. The idea behind the cover is that consumers will be covered for a specified period in the event that they are unable to work and therefore make repayments due to redundancy, illness, or accidents. However, research was carried out by various agencies, and the industry came under severe criticism for the inappropriate sale of policies amongst other things.

Many people have ended up purchasing PPI that is not suited to their needs as a result of this mis-selling, and the FSA aims to steer customers towards suitable plans based on their needs via the website. Customers will be asked a number of questions on the site, and will then be able to view a choice of suitable policies so that they do not end up purchasing inappropriate PPI.

In addition to helping consumers to find the right PPI policies for their needs, the FSA has also promised that it will be taking far more stringent action and imposing far higher fines on companies that are found to be mis-selling Payment Protection Insurance in the future.

Tom Smith
4th November 2007

Debt advisers expecting flood of enquiries

According to a recent report debt advisers across the UK are gearing themselves up for a flood of debt related enquiries as thousands of fixed rate mortgage deals come to an end. Many consumers across the UK took out fixed rate deals in 2005 for a two year period, with a low fixed rate of under 4.5% in many cases.
However, since that time interest rates have rocketed, with a series of five interest rate hikes in the space of a year, taking the rate up to 5.75%.

The credit crunch that was sparked in the United States sub-prime sectors has also had global repercussions, and has resulted in some lenders hiking up their mortgage rates even further. This means that the thousands of people that will be coming out of their fixed rate deals will not only face a huge rise in their interest rates and mortgage repayments, but will also find it increasingly difficult to remortgage to a more competitive deal.

Even those that switch to another fixed rate will have to fix at a far higher rate than they did in 2005, which means a huge rise in their monthly repayments.

It is thought that in the coming months around twelve thousand homeowners will see their fixed rate periods come to an end, and will face repayment rises of 40%. This means that many will have to find hundreds of pounds extra each month in order to continue with repayments on their mortgages, and this could send many households into the red, tipping them over the financial edge and leaving them facing repossession.

All homeowners that are due to come out of their fixed rate deals will face these problems, with many lenders having hiked up their standard variable rates to 8% or more. However, sub-prime borrowers will face severe affordability problems, as many sub-prime lenders have increased their rates to beyond 10% according to some experts.

It is thought that both the level of debt enquiries and the level of repossession will increase over the coming months as a result of this situation. The Consumer Credit Counselling Service has announced that it is opening a specialist repossession advice centre to deal with the severity of the situation.

Tom Smith
25th October 2007

Students need to be more careful over getting into debt

According to a recent report the level of student debt in the UK is on the up, with many students graduating from university having racked up huge levels of debt along the way.

One credit reference agency is now urging students to think very carefully before getting themselves into debt, and to ensure that when they do take out credit cards and loans that they use the money sensibly and for necessities, and they make the repayments sensibly and on time.

Melanie Mitchley, an industry expert from the firm Call Credit has stated that students need to be mindful of the effects of getting into debt, and need to be careful about building up debt. She stated that new students need to manage their finance more sensibly, and need to keep on eye on their finances.

According to Barclay’s figures former students have been graduating with debts that are in excess of £13,000 on average. Another survey into student debt indicates that students could soon be graduating with average debts of around £20,000.

Ms Mitchley stated: “We are urging all students whether freshers or in their final year to be aware of the potential pitfalls if they don’t take control of their financial affairs. Our experience has shown that taking on credit needn’t be a problem if you manage your finances well and ensure you keep up your repayment.”

Another survey carried out by the Halifax showed that credit cards, overdrafts, and loan were amongst the most common forms of debts for students, with 43% of students surveyed having borrowed on credit cards, 73% using an overdraft facility, and 83% having taken out a loan.

One Halifax spokesperson stated: “These are significant sums for anyone, let alone someone who is not yet working full-time.”

Tom Smith
5th September 2007

Sainsbury’s increases interest free period on credit cards

The supermarket giant Sainsbury’s has been offering a range of financial products and services over the years, including some very competitive deals on credit cards.

According to recent reports the retail giant has now announced that its credit cards – which already offered an attractive ten months interest free credit on purchases – will now be offering an increased interest free period of twelve months, which is likely to attract increased custom as well as placing the cards amongst the top of the best buy tables.

Officials from Moneyfacts have stated that the cards are all the more attractive because they also offer a low rate life of balance transfer facility, so in addition to enjoy twelve months of interest free credit on purchases customers can also transfer costly existing credit card balances and enjoy a low rate of interest for the life of the transferred balance – the rate currently stands at 5.94%. The standard variable rate on the credit cards is 15.9%.

One official from Moneyfacts stated: “The standard and platinum deals were already competitive, but extending its offer to 12 months pushes its standard card to hold joint top position of the moneyfacts’ best buys, along with Halifax and HSBC, with all three offering a standard revert to rate of 15.9% APR. The Platinum card offer is market leading, with the next best interest free offer at 11 months. These cards also come with the added benefit of a lifetime balance transfer deal at 5.94% pa, which in today’s market is a pretty competitive. Combined with the 0% offer, these deals are a very attractive overall package.” 

She added that the Sainsbury’s credit cards were now looked upon as a five star deal, as they offered savings on both transferred balanced and purchases, making them great value and convenient.

Tom Smith
5th September 2007

Barclays now offers travel cards

With millions of Brits heading off on their summer holidays abroad, one major consideration is how to deal with taking money abroad.

Some people rely on cash and traveller’s cheques for spending abroad, whereas others prefer the convenience of credit and debit cards, despite the security risks associated with using your plastic abroad. However, there could be a safer alternative available, that combines easy and convenience with increased security.

Pre pay travel cards are available for consumers that want the ease and security of having a card rather than cash when they go abroad, yet do not want to risk loss or theft of their regular credit and debit cards. These cards are also useful for those that want to ensure that they do no spend more than they have budgeted for when they go abroad. Like a pre pay phone, these cards can be loaded with cash before you go on your holidays, and can be used up to the amount that you have loaded onto the card.

Barclays has now decided to offer travel cards to customers, which will be free to obtain and load with cash. However, ATM withdrawals will be charged at 2%, with a minimum £1.50 charge, and there will be a 2.75% conversion fee if it is in a different currency. A Barclay’s spokesman stated: ‘Pre-pay cards are safer than cash and more flexible than travellers’ cheques. Furthermore it helps holidaymakers budget for the spending on their trip by not allowing them to spend more than the balance on their card.’ 

There are travel cards available from other providers as well, and these are the Post Office, which charges a flat fee of £10 for the card and for loading, and from Travelex, which charges 2% of the amount being loaded onto the card with a minimum fee of £10.

Tom Smith
17th September 2007

Many banks and card companies to be sympathetic over postal delays

Over recent weeks the UK has been hit by a number of postal strikes, which has disrupted many services.

A number of banks and credit card companies in the UK have stated that they intend to be sympathetic with customers who may have suffered as a result of the postal strikes in terms of payments coming in late because of the postal delays. Although banks have suffered a fair amount of bad press lately some of the leading banks and credit card companies stated that they would take the postal strikes into account when it came to customers’ accounts.

The postal strikes were set to go on for two week in total, and this means that those paying by cheque will find that their payments may be delayed, which could result in their bank accounts exceeding the overdraft limit or their credit cards going over the credit limit due to late payment. Banks and credit card companies are urging consumers that experience this problem to contact them, stating that they will ensure that they are sympathetic when it comes to the removal of charges that were applied as a result of late payment because of postal delays.

One Barclaycard official stated: ‘We will take an understanding approach and if anyone does incur a fee they should come and talk to us.’ Lloyds TSB, Halifax, and HSBC have also stated that they will treat each case sympathetically, and that customers that have experienced postal problems that have affected their accounts should contact them as early as possible. Other banks have added that customers may want to look at alternative methods of payment whilst the postal strikes are underway.

Consumers are warned that trying to dupe the banks into thinking that payment is late because of postal strikes will not be easy. One bank spokesperson stated: ‘We will treat every customer individually and do our best to be sympathetic. But if someone is always in the red, the postal strike will probably be just another excuse and will be seen accordingly.’

Tom Smith
17th September 2007

Are cheque payments becoming a thing of the past?

There was a time when paying for something by cheque was the norm for most people, but with the soaring popularity of credit and debit cards in the UK it seems as though cheque transactions are becoming a primitive payment method that will soon be left trailing.

This is being reflected by the number of retailers that are now turning away cheque transactions, and the latest to jump on the bandwagon of saying no to cheques is Sainsbury’s.

The supermarket giant has announced that as from the 1st August this year it will no longer be accepting cheque payments from customers. Although this does reduce the range of methods that customers can use to make payment for goods, the vast majority of customers tend to use debit cards, credit cards, or cash anyway. The no cheque rule will be applied in all 800 of the supermarket chain’s stores.

According to officials from the supermarket chain it makes sense to stop accepting cheques because so few people use them and because processing them can be time consuming. A number of other high profile retailers have also decided that they will stop accepting cheque payments, and this includes WH Smith, Morrisons, Boots, Asda, and Shell. Again, the main reasons seem to be lack of use by customers and time consumption for the companies in question.

With more and more retailers stopping cheque payments it is likely that an increasing number of transactions will now be made using credit and debit cards, which could see the number of card transactions made each year in the UK rocket even further.

Speaking about cheque use one Sainsbury’s spokesperson stated: “Like other retailers they are being used less and less by our customers.”

Tom Smith
27th August 2007

Many people permanently in the red with overdrafts

A recent report has highlighted that by the 20th of each month many Brits find themselves running out of cash and having to rely on their overdrafts to see them through the rest of the month until payday.

In some cases, once payday comes around, Brits are able to slide back into the black for several weeks. However, there are also many Brits that will go straight back into the red, even after their salary has been paid in, because their accounts are permanently overdrawn.

Around two million consumers in the UK are always in the red, unable to pull themselves out of their overdraft debt and therefore having to rely heavily on their overdraft facility. In the past year, according to research, around ten million people in the UK have used their overdraft on at least one occasion. Rising interest rates and repayments may have contributed to this figure, with more and more people having to dip into their overdrafts in order to stay afloat due to rising repayments.

One industry professional stated: ‘It’s no surprise so many people are permanently in the red – with interest rates having risen five times in the past year consumers are not doubt feeling the squeeze. People often dipping into their overdraft need to watch the Effective Annual Rate as some can be punitive and they may find they are better off spending on a 0% credit card in the future.’

Those aged 55 years and over were found to be the best at staying out of the red, with an impressive 64% in this age group managing to stay in the black. This compared to 40% of 18-24 year olds. In the 45-54 age group 5% were permanently in the red.

Tom Smith
31st July 2007

How To Build Up a Good Credit Rating

It is evidently not a good thing to have a bad credit rating. For example, it can limit your borrowing options. The sorts of thing that contributes to a poor credit rating are county court judgments, defaults on payments and bankcruptcy orders. In the case of circumstances such as these, the only way to get credit (loans, mortgages) is through the sub-prime market. Here the borrower is charged high rates of interest to reflect the apparent risk to the lender.

There are two main credit reference agencies who compile credit histories on individuals. These are Equifax and Experian. They take their information from sources such as the electoral roll, county court judgments and the payment of past debts. When anyone takes out a new form of credit it will leave a record which these credit agencies also draw upon. But it is not the credit agencies who make the decision about whether to offer credit to would-be borrowers. It is the lender who makes that decision, based on the information provided by the credit agencies and their own lending criteria.

Under the Data Protection Act, if a lender refuses you credit, it must tell you why. Under the Act, if scoring was used to help the lender decide not to give you credit, then you are entitled to ask for you application to be reviewed. Even it this doesn’t help you to get credit this time, you will be able to see your rating and where it might need improvement. Or it can highlight errors that may be on your record (and they do happen) and you can try to get them rectified.

If you do have a poor credit rating, it is a good thing to work to make it better. Although bankcruptcy remains on a rating for up to six years, a year of good credit practice should return a rating to a healthy state.

To begin with, you should ensure that you pay off your creditors on time. If you do have to miss a payment, tell the creditor and make sure that you make the payment the following month.

Even simple things like making sure you are on the electoral role and completing credit application forms correctly will help to improve your rating. Agencies allow people to explain why they may have had a poor credit performance, and a ‘notice of correction’ can be attached to their report explaining, for example, whey they missed payments.

It is worth buying access to your credit history from one of the agencies to make sure that everything is in order. As an example, if you have had a county court judgment, but have since paid the debt, make sure the payment is recorded on the file. If you have had a bankcruptcy order annulled, make sure a copy of the annulment or order of discharge is sent to credit agencies.

Another way of boosting your rating is to take out a store card and pay off the balance regularly and on time. The rating can be improved quickly by opening a variety of accounts, but make sure you do pay off the debt each month. You can also ask someone you know well (family or friend) with good credit history to co-sign for a small loan or credit card. This also helps your own rating.

It is a bad idea to keep applying for credit if you have already been refused by another lender. A lot of searches on history does not work in your favour. The tip is to ask the lender if you fir the profile of people they give credit to.

Having no credit record can be as bad as having a poor credit record. So if you have no credit record, start to build one up – a good one.

More Information:

• Credit Building Tactics
• Bad Credit-Credit Cards

Tom Smith
19th June 2007

Debt considered acceptable because of student loans

According to a recent report the popularity of student loans has made debt in the UK seem even more acceptable.

According to the financial education charity Credit Action student loans have become such a norm that being in debt has become something of a fact of life. And according to officials from Credit Action these student loans have nothing to do with a need for money, but more to do with the easy access to student loans.

One official from Credit Action described student loans as ‘government endorsed debt on a massive scale’. Of course, students can find themselves in need of financial aid at some point during their education, but the easy access to student loans has resulted in many students just taking out loans for the sake of it rather than through real need, placing them on a downward debt spiral that could lead to problems later in life.

According to Chris Tapp from Credit Action there is not enough caution exercised with student loans, and the easy access to this type of finance has made debt appear to be acceptable even for the younger generation. With consumers levels in the UK at sky high levels this has raised concern amongst some charities and campaign groups, as those in their late teens and early twenties begin a debt ridden life before they have even completed their education.

According to Mr Tapp student loans enable students to live lifestyles that are beyond their means – something that they then become used to, and something that many have to continue funding through further finance, as their initial jobs after leaving college or university is unlikely to be a high paying one.

Tom Smith
17th June 2007

Credit Card Deals In Different Categories

Looking for a credit card?
What deal are you looking for?
Here are the best three deals in certain categories, depending upon what you are looking for.

These are some of the best balance transfer credit card rates currently available.

Mint Credit card
This has a free interest balance transfer until 1 August 2008, and a 2.5% transfer fee. There is zero percent on purchases until 1 January 2008, and another six months at zero percent for balance transfers made in October 2008. The interest free period works out at 54 days. The APR on purchases is 14.9%. The transfer or handling fee is one of the lowest at 2.5% and over a year at zero percent on balance transfers. That’s a good period, and with zero percent on purchases till January you have a long period of free money – just be careful to tie things up before you go onto regular interest rates.

Capital One Platinum card
This has a 3% handling fee and zero percent interest on balance transfer until 1 July 2008. The APR on purchases works out to 15.9% and the interest free period is 54 days at maximum. The card also comes with three months worth of free credit on purchases. This has a shorter period than the Mint and a shorter period for both the balance at zero percent and for purchases.

Barclaycard Premium
The zero percent interest on balance transfers lasts until 1 July 2008 with a 2.9% fee. The interest free period works out at 56 days maximum. The APR on purchases is 14.9%. The card comes with various insurance protection deals and three months of free interest on purchases. This has a similar period to the Capital One Platinum but a slightly lower handling fee.
Of the three Mint looks the best.

What about the best life of balance rates? These are rates for borrowers who are fed up of continually transferring their balances.

M&S &More card
The life of balance interest rate is 4.9%, and there are no fees. The APR on purchases works out at 19.9% with a maximum interest free period of 59 days. The card also has zero interest on purchases until 31 January 2008 and &More reward points on purchases. The zero percent interest on purchase makes this attractive.

Citibank Platinum Mastercard
The life of balance interest rate is 4.9%, and there is a fee of 2.5%, which is capped at £75. The APR on purchases works out at 16.9%. The card also has 0.5% cash back on all purchases and comes with Identity Theft protection. The cap at £75 only kicks in if you have a balance greater than £3000, but the cash back could make this seem tempting. Apply now

Sainsbury’s Bank Platinum card
This has life of balance interest rate of 5.9% no transfer fee. The APR on purchases works out to 15.9. The card comes with ten months free credit on purchases. The free credit on purchase make this card look a good bet, as the ten months will take you further than the M&S option. M&S’s reward points might swing it for you.

Now onto those cards with the best APR rates on the market? This is for steady card owners who don’t want to switch, but want a good interest rate.

Barclaycard Simplicity
This has an APR of just 6.8%. There is no balance transfer available. The maximum interest free period is 56 days. The card comes with various insurance products, but these may of limited use to you. The low APR may be the key.

Egg Money
The APR is 7.9%, with no balance transfer available. The maximum interest free period is 50 days. The card has one percent cashback on all purchases. The APR is attractively low, and the cashback may make this a good bet for you.

Intelligent Finance Flat Rate
This has an APR of 8.9%, with no balance transfer available. The interest free period is up to 59 days, and the card comes with no extras. Compared to Barclaycard’s Simplicity and Egg’s card this has no frills and a higher APR, so the other look to give a better deal.

Finally here are the top three card for cashback deals. Here card holders earn cashback on their spending.

American Express Platinum card
The cashback offer is 3% for the first three months, followed by 1.5% on balances over £10,000. The APR on purchases works out at 14.9%. There is no balance transfer offer and the interest free period is 56 days. The card has online fraud and purchase protection benefits. If you’re after a cashback deal, then three percent is the best you can get, but you’ll need to have no need of a balance transfer. The other benefits are probably of limited value. Apply now

Egg Money
The card has one percent cashback on all purchases. Selected dealers have a higher cashback rate, e.g. electrical goods from Dixons.co.uk earn 5% cashback. The APR is 7.9%, with no balance transfer available. The maximum interest free period is 50 days. The card has one percent cashback on all purchases. If you think you’ll be buying a lot of electrical goods from Dixons, then this card will probably come out as better than the American Express option. But overall the Amex card has a wider appeal.

CitiBank Online Platinum card
The cashback offer is 0.5% up to £3,000 per month. The APR works out at 16.9%. There is a balance transfer offer of 4.9% for the life of the balance. The interest free period is 56 days, and there are no additional benefits. This is third best on cashback – by quite a way. Apply now

It is best for you to understand your requirements and look at your outstanding balance and future spending before you choose yourself a card. Getting a particular card for your specific requirements can work for a set period.

Tom Smith
13th June 2007

HSBC may be confusing customers over withdrawal fees abroad

With the summertime fast approaching many people in the UK are getting ready to jet off abroad to enjoy a relaxing holiday, and most will go armed with their debit cards in case they need to withdraw any cash when they get to their destination.

For consumers who have a packaged current account with HSBC the news appeared to be good, as HSBC has been boasting that these customers can enjoy using their debit cards at cash machines abroad without facing any withdrawal fees. However, although this makes it appear that the transaction will be totally free of any charges this is not actually the case.

HSBC do waiver the withdrawal fee for customers that have a packaged current account, which is basically a premium account that offers a range of benefits but costs the customer fourteen pounds a month. Being able to make fee free cash withdrawals at cash points abroad with a debit card is one of the benefits offered to these account holders. However, what many consumers fail to realize is that a loading fee of 2.75 percent is added to the foreign currency exchange rate.

According to campaigns and advertisements from HSBC: ‘Withdrawals from Cirrus/Maestro ATMs worldwide, free from HSBC transaction fees’ and ‘Cash withdrawals from ATMs worldwide are free from HSBC charges’.

However, viewers that look at the foot of the advertisement will see the small print relating to the loading fee, which means that these transactions will not be free of charge because of the increased foreign currency exchange rate.

An official from HSBC stated: ‘The 2.75% loading is not a fee. It’s part of how we calculate our exchange rate. We don’t believe we have misled our customers.’

However, Nationwide, which is one bank that does not charge any loading fee or additional charges is looking into the claims made by HSBC.

Tom Smith
12th June 2007

Happy birthday debit card

This beginning of June marks the twentieth anniversary of the debit card in the UK.

It is difficult to imagine how the nation managed without the debit card, but until 1987 this is exactly what we did. At the beginning of June 1987 Barclays launched its Connect Card, revolutionizing the way that consumers accessed their cash. Soon bank customers everywhere were able to access their money instantly and easily, as well as being able to make purchases quickly and conveniently.

Within a year of the launch of the Barclays Connect Card, a million debit cards had been circulated in the UK, and this has steadily grown over the years with nearly seventy million debit cards now in circulation, two decades after the initial launch. According to APACS around 143 purchases per second are now made through the use of a debit card in the UK, with people paying for everything from holidays and electrical to petrol and groceries with their plastic.

Debit cards are more popular than credit cards in the UK, and 85 percent of consumers in the UK have a debit card compared to 66 percent of consumers that own a credit card. Nearly seven billion transactions each year are carried out on debit cards.

A spokesman from Barclays stated: “The massive change when debit cards were introduced was that people were able to leave their chequebooks at home. It gave people the convenience to access their current accounts anywhere in the world. It was a massive convenience for the retailer as well.”

He added: “Without payments moving to an electronic platform, internet retailing could not have taken off. The ability to make a payment accurately without having to send off a cheque has created this online channel for retailers.”

Tom Smith
12th June 200

Are You Paying For Your Cash Back Credit Card?

The offer seems to be too good to be true.  Spend money on your credit card and your provider will give you cash back on the card as part of your credit card loyalty program.  The more you spend, the more cash back you become entitled to. This all sounds well and good, but if you’re not careful you may very well find out that it is you who are paying for the cash back bonus you’re getting, not your UK credit card provider.

In order for your cash back reward program to work in your favor you need to be a disciplined credit card user.  This does not mean that you should not use your credit card, or only use it in certain circumstances.  In fact, you really should be using the card as often and as much as you can if you want to take the full benefit of the loyalty program.  What it does mean, however, is that you need to make sure that you clear your credit card balance at the end of each credit card statement billing date.  If you fail to clear your credit card balance on the statement due date, and you carry-over your credit card balance to the next month, then you start to become the person paying for your cash back rewards, not your credit card provider.

The reason why it is so important that you do not carry over a credit card balance to the next payment statement date is because you need to avoid incurring any interest or fees if you want to benefit from the cash back loyalty program.  As soon as you lose this, any benefit you would have got from your cash back credit card loyalty program will be cancelled out by the interest and fees you need to pay for carrying over a balance on the card.  Indeed, you may well find that the interest and fees you pay each month for carrying over the balance on your credit card will exceed any cash back you would be entitled to.  Unfortunately, this aspect of cash back credit cards is something that UK credit card providers are relying on in order to fund the cash back they’re offering you in the first place.

Consequently, if you are the type of UK credit card user who pays off their credit card statement balance at the end of each billing cycle, then having a cash back credit card loyalty program can prove to be very lucrative for you.  However, if like 60% or so of the other users of UK credit cards you are a borrower on your credit card, then it is very likely that you should look for some form of alternative loyalty program or, more importantly, a credit card that offers you a lower monthly interest rate than your current card provider offers, as, in the long run, this is very likely going to save you more money.

If you are in any doubt as to whether or not a UK cash back credit card is for you, be honest with yourself and ask yourself whether or not you have the discipline to pay off your credit card statement each month.  If the answer to this question is yes, then this card is working for you.  If the answer is no, you are paying for your credit card cash back loyalty program offer – and then some.

Richard Smith
13th May 2007

More Information:

• Cash Back or Rewards – What’s Your Preference?
• Available Types Of Credit Cards
• Credit Card Charges

External Links:

• More cash back credit card offers from CardGuide.co.uk
• Cash Back or Rewards – You Choose
  Not sure which would be the best for your spending levels? This article discusses the advantages and limitations of bothtype of credit card offers

Annual fee imposed by Morgan Stanley

Customers using the Black cash back credit card with Morgan Stanley have been hit with a £20 annual fee. The Black credit card is offered to customers that have been turned down for the platinum card with Morgan Stanley, although it is not actively marketed by the company.

The cash back levels on the Black card are 1% for the first £2000 worth of purchases in the year, and 0.5% thereafter. However, the cost of the annual fee means that those spending less that £2000 on their cards will effectively have their benefits offset, which means that the card is not really providing any reward at all, despite being a cash back card.

According to officials from Morgan Stanley not all customers using the Black cash back credit card will be charged the annual fee.

One Morgan Stanley spokesperson stated: ‘We have received the spending patterns and repayment history of customers and as a result we have imposed the fee for a number of customers.’

However, some cardholders are annoyed by the charge, and feel that it is unjustified and unwarranted.

One Black cardholder stated: ‘I spend around £300 a month on the card and clear the balance by direct debit at the end of each month. I’ve never missed a payment and I suppose I’m one of those customers that doesn’t actually make the credit card company any money. I liked the cashback aspect of the card, but this fee doesn’t make it worthwhile now.’

The annual charges are due to come into force in June of this year, and consumers that want to avoid having to pay an annual fee should start looking for an alternative credit card before this time. As with many other card companies, it is thought that this annual fee could be a way for the card company to recoup some of the revenue losses that resulted from financial regulators placing a ceiling limit on penalty charged last year.

Consumer group wants investigation into calculation of credit card interest

The UK consumer group, Which?, has demanded an investigation into how credit card companies calculate the interest to be paid on cards, claiming that many companies are using a wide range of methods to calculate interest, which is not only netting them more money but is also causing mass confusion for credit card users.

According to the watchdog, these credit card companies are using around a dozen different methods in order to calculate interest on credit card repayments, and the confusion that this is causing is resulting in the companies making even more money from their customers.

Which? officials have gone on to say that the way that these credit card companies are calculating the interest to be charged means that comparing APRs on credit cards to find the best deal is ineffective. Which? states that credit card companies that make up for ninety percent of the credit card market are using around a dozen different ways to work out the interest. This includes the top twenty providers of credit cards. According to Which? there are now a number of factors that are used by these companies in order to determine how the interest will be calculated on a particular account.

One official from Which? stated: “People believe that APRs are a dependable way of comparing credit cards, but our research shows that APR cannot to be relied upon for true credit card comparisons.”

However, APACS officials state that using just one way to work out interest would also affect consumers, as the process used may not suit every consumer.

One APACS official stated: “There are a huge variety of cards on the market and some people prefer to have a lower APR but pay earlier, others might like a slightly higher APR but only want to pay interest on the amount left outstanding.”

Tom Smith
28th April 2007

Costs are recouped on credit card penalty ceiling limits

In 2006 financial regulators in the UK reviewed the penalty charges that were being imposed on the accounts of credit card holders that made late payments or went over the agreed credit limit on the card, even if only by a few pounds.

In many cases these charges were set at around thirty pounds – sometimes more depending on the card issuer or credit card company. As a result of the review, financial regulators in the UK enforced a new rule that meant that banks and credit card companies in the UK could not charge more than twelve pounds in this sort of situation – a move that cost many card issuers and companies a fortune in lost revenue.

However, it seems that many banks are now trying to recoup the revenue that has been lost through the ceiling limits placed on these cards by finding other ways to try and get money out of card holders. They are doing this by pushing up the cost of making transactions through cash machines, charging customers huge amounts of interest for the privilege of using their card to withdraw cash from machines.

A spokesperson from the price comparison website Uswitch stated:  ‘Consumers could be forgiven for thinking that they are being treated as the banking industry’s personal ATM. It’s easy to see why the major banks continue to announce record profits, which this year alone totalled in excess of £40bn, when the welfare of their customers continues to take a backseat to shareholders.’

According to Uswitch the amount of interest charged for cash withdrawals has rocketed recently, going from around twenty percent in 2005 to over twenty seven percent. Card issuers have also reduced interest free periods on credit cards.

Tom Smith
25th April 2007

• Credit Card Charges

The Pros And Cons Of Payment Protection Insurance

Lenders are always eager to convince borrowers to protect their repayments for loans, credit cards, store cards, mortgages and other financial products. And they have a point. People in the UK are saving less and borrowing more, with a high rate of debt. Read more

Choose credit cards over store cards this Christmas

If you are planning to spread the cost of Christmas and the New Year there are a number of options available to you. For many people, particularly those lured into shops when the January sales come around, the temptation to take out a store card is irresistible, with retail employees throwing what sounds like offers in to encourage the consumers to apply for the store card. However, consumers should think carefully about whether a store card is worth it before making a commitment and spending money on such cards.

A store card can only be used in one shop or a certain chain of stores, and is therefore of no use to you if you want to pay for other items in other shops and stores. Store cards also typically have very high interest rates, so even though you might be offered a small discount on your purchases for using the store card you will more than make up for this in terms of the interest that you will pay for the privilege of using the card. With stores cards you don’t get special offers such as interest free periods, so you will be stuck with paying interest on any balance that you have on the card.

A more sensible solution for those planning to splurge out in the January sales is to get hold of a good credit card in plenty of time – one that offers an interest free period on purchases giving you time to repay the balance without having to pay interest. Even if you end up with a credit card that does not offer an interest free period, or where the interest free period expires before the balance has been repaid, you will still pay a lower interest rate than most store cards charge, and you have the added advantage of being able to use the card in other stores.

There are some advantages to taking out a store card, such as discounts on certain lines and products, but in order to really benefit from this type of deal you need to be the type of consumer that pays off the full balance on the store card each month, thus avoiding the extortionate interest charges that will otherwise be incurred. 

Put credit card fraud into perspective

As Christmas approaches many consumers in the UK have started to worry about the risk of Internet fraud, and although buying gifts and other related items online has become hugely popular over the years many are still worried about the possibility of becoming the victims of credit card fraud. This worry is further reinforced through the various warnings that always come out at around this time of year, warning consumers to beware of credit card fraudsters.

However, some new advice has now been issued by a company that works to protect both retailers and consumers from this type of crime. The 3rd Man has advised consumers not to listen to ‘scaremongers’, and has urged retailers to put this type of criminal activity into perspective. The 3rd Man wants more emphasis put on the fact that by and large Internet shopping is safe, and this is because most reputable retailers use secure software to ensure that the consumer’s financial and personal data is not compromised.

Each year billions of pounds is spent on Internet shopping by consumers in the UK, but the many stories about the risk of online shopping and credit card fraud could result in a drop in consumer confidence. The 3rd Man does advise consumers to ensure that the site that they are using is a secure one, and providing that this is the case there should be no need to worry.

The CEO of the company stated: “Every day there is a story about fraudsters cheating their way into our pockets. The introduction of Chip and PIN has made a massive impact on fraud, reducing crime in stores. It has also persuaded many fraudsters to target ‘card not present’ environments such as Internet shopping, but equally many retailers have recognised this and put in place proper systems to combat the criminals. If people wish to shop on the Internet they should be confident that it is fundamentally safe. It is the safest way to shop!”

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• Identity Theft

Home credit lenders must make it easier to compare deals

Home credit lenders have recently been targeted by the Competition Commission in the UK, and the industry has been told that it needs to make things easier for consumers in the UK when it comes to comparing deals and repayments on finance offered by home credit companies. The commission also added that the industry needed to ensure that consumers that repaid the loan earlier than arranged received some form of rebate. However, the commission has decided not to enforce a price cap, as officials state that this could hit some consumers hard.

Research showed that the average sum borrowed by UK consumers in the form of home credit was £300, with loans starting from around £100. The home credit industry has nearly two and a half million customers in the UK, and the majority of these borrow under five hundred pounds in the form of home credit. The Competition Commission, however, has decided not to place any price cap as more vulnerable consumers that may need more could otherwise find themselves in difficulties.

After it came to light that a small number of home credit companies were controlling the market when it came to this type of finance, the commission was said to be ‘opening the market’ when it came to home credit. The commission is in the stages of doing this, and has stated that lenders in this industry will need to publish their data on a website, so that consumers can then easily compare terms and costs in order to get the best deals.

With regards to its decision not to enforce price caps, the chairman of the commission said that he thought that capping might have “…reduced the availability of home credit to the most vulnerable customers, specifically those with no access to alternative sources of credit. We also felt that price caps could prove to be extremely difficult to apply and enforce in this industry.”

Homeowners cautioned over the true cost of unsecured personal loans for home improvements

The latest figures released by the British Bankers’ Association (BBA) show that 198,242 mortgages, totaling £21.8 billion were approved in the UK in October, a six percent increase on September’s figures and an eight percent increase on the figures year-on-year.  At £144,200, the average UK residential property mortgage also saw a slight increase during the month.

Nonetheless, while, “the secured lending market undoubtedly remains robust,” according to David Dooks, director of statistics at the BBA, “after discount price growth, lending volumes are not dissimilar to the same time last year” – indicating that the recent base rates increases by the Bank of England mat be having some effect on the demand for UK property borrowing.  A factor echoed by Milan Khatri, chief economist at the Royal Institution of Chartered Surveyors, who foresees a slowdown in the UK property borrowing during the course of the next year once the full impact of those Bank of England rate increases filters through and the true higher cost of borrowing starts to be felt.

In the meantime,  a recent report by Money Expert is warning that an increasing number of UK homeowners are now opting to take-out unsecured personal loans to finance their home improvement projects over more cost effective ways of this type of borrowing. 

While this may, itself, not be too alarming, Money Expert’s findings also indicate that UK homeowners are not fully aware of how much their unsecured personal loan borrowing is costing them in extra interest payments.  In some cases, interest repayments on a four year £10,000 unsecured personal loan taken-out for home improvement projects can vary by as much as £2,500 – or 25%.

Sean Garden, chief executive of Money Expert, therefore warns, “Personal loans can vary in price dramatically – you could end up paying back as much as a quarter of the amount you borrowed in extra repayments unless you research the market carefully.”

As such, if you are one of the many new homeowners who have recently been approved a UK home mortgage loan and are now looking to undertaken some DIY home improvements on your new home, make sure you look around and research the many different types of UK unsecured personal loans available in the market to make sure that you get an unsecured loan that meets your needs without breaking the bank in extra interest payments.

UK Credit Card Consumers Should Be Watchful

The latest scam to defraud vulnerable credit cards holders in the UK has come to light in the Worcestershire area, where thieves pretending to be police officers or bank workers managed to steal credit cards with which they then took cash from consumers’ accounts. In the recent incidents the thieves managed to get away with thousands of pounds after obtaining the credit card PIN numbers fraudulently from consumers that thought that they were talking to professionals and officials.

According to police officials, the thieves had acted very convincingly, and had actually called consumers to tell them that they were in danger of being defrauded and that they were trying to stop this from happening. The thieves posed as officers and bank officials in order to convince the victim that they were acting in their best interest, and as a result obtained personal banking and financial details from consumers.

Officials have now warned that consumers need to ensure that they don’t give out any information of this sort over the phone. One officer stated: “Banks, building societies and the police will never ask for PIN numbers over the phone or even face-to-face.” He added: “They are a matter for the individual only. If someone does ask, no matter the circumstances, suspicions should be immediately aroused and the incident reported to police.”

Consumers have always had to remain vigilant for different types of credit card fraud, and this is one of a long line of different scams that have seen consumer conned out of thousand of pounds in the UK. Police have asked card holders to challenge anyone that they are suspicious of ‘firmly but politely’ in order to try and verity their identity. Officers have also issued local and national numbers for anyone to report suspicious activity of this sort.

Choosing the right card

Choosing a credit card can be a process full of heartache and confusion; there are so many to choose from. But do they really offer different benefits?

Whether you are venturing into the world of credit for the first time or are thinking of changing your card, we examine the process of choosing a card and reach some interesting conclusions.

Loads of money!

It was clear some decades ago that credit cards were here to stay. In the late seventies there were articles on TV and in newspapers that soon we wouldn’t use cash any more – no more paper and no more heavy coins jangling in the pockets.

It hasn’t quite gone that way, but certainly these days it’s a question of which card to choose not “do I want one?”

Everybody’s different

What type of credit card user are you?

There are some very set patterns that go to make up the million or so credit card users in the UK today. There are so many of us that all together we owe in the region of £180 billion. And that’s a lot of interest!

Pay it off

Do you clear your balance every month? If you are one of these tidy users then really the market is completely open to you as you won’t have to concern yourself with how much interest the credit card company charges. It would be worth casting an eye around the market though just to make sure you’re aware of what is on offer.

To pay it off, or not pay it off, that is the question

If you use your card for regular purchases each month and usually pay off those regular sums but occasionally run up larger bills, perhaps at holiday time or Christmas, then you do need to be aware of how much interest you are being charged.

You should also examine how long the interest free period is offered on the card. Most companies will give you between 56 and 59 days interest free credit, but a rare few don’t give any!

The hole in the wall

If you are going to use your credit card to obtain cash then you are going to get stung anyway you look at it. Going to the hole in the wall will incur interest on the cash as soon as it’s in your hand; there are no interest free periods with cash transactions.

Check to see what rate the company charges for cash; it’s bound to be higher than other rates on the card.

A debt is a debt is a debt

If you are somebody who has run up a debt, or is likely to run up a debt, on your credit card and lets it sit there, then you really do need to go for the cheapest option you can get your hands on.

There are two schools of thought for outstanding balances. Some people say chose a credit card that has a low interest rate for the life of the balance and stick with it. Some people say go for the zero rate promotions and switch when they come to an end. We say it’s up to you.

Buyer beware

If you are going to change between zero rated cards and become a bit of a ‘rate tart’ then you will need to keep an eye on how often you do so and whether there are any penalties charged when you transfer to the next zero rated account.

Switching from card to card for the zero rated incentives can affect your credit rating. Credit card companies have now got wise to the fact they are losing something like £1bn a year in potential revenue by people taking advantage of their offers. So watch out for those fees.

Something for nothing

Credit card companies have also now introduced what are known as honesty boxes on their promotions. These show all the interest rates they charge and should be displayed in a clear understandable form, so you can easily compare like for like.

As far as other incentives are concerned there are cards out there that offer reward points or discounts at selected retailers, cashback, zero percent on goods purchased or even, on special charity cards, a small donation to a named charity every time you make a purchase. There will be one for you.

Choose your weapon

The credit card industry spends billions of pounds every year on encouraging users to transfer balances or to take out more credit. The different types of card on offer are staggering and have been developed to compete in the High Street wars of open finance introduced in the eighties. Today, some of the larger organisations like Barclaycard or American Express will offer several different cards each with their own unique benefits. These demonstrate that we all may be unique, but we each share the same type of habits when it comes to dealing with our finances.

Choose carefully, for your credit card can be your friend if used wisely in the fight to survive the daily financial grind or it can very easily become your enemy.

The Pros And Cons Of A Business Credit Card

There are hundreds of business credit cards from banks and other business service providers. In fact, there are so many that it can be difficult to choose the right one.  Here’s a guide to what you should look at when choosing a business credit card and what to avoid to make sure your business stays financially healthy.

Business Card Advantages

One of the main advantages of a business credit card is that it can be used to manage cash flow. Business owners and their employees can use business credit cards to pay for goods or services that require immediate payment. At the same time, they can benefit from an interest holiday of up to 56 days before the money is deducted from their business accounts. Deferring payments in this way can be very useful for business owners.

Another key advantage benefits both employers and employees. When employees travel on business they often have to pay for hotels, car hire, flights, meals and business entertaining. In many cases, this comes out of their pocket and they have to wait to be reimbursed. Using a business credit card means that employees can charge these business expenses straight to the business without waiting for reimbursement. This keeps their personal finances healthy.

Saving Accounting Time

For employers, this practice has another advantage. Hours and hours of accounting time (and business money) can be spent on sorting out employees’ expenses. This workload is much reduced with a business credit card. While businesses may choose to have the backup of having employees submit expense reports, the business credit card statement may be enough. Each month, business owners get a statement that itemises all transactions on the business account, regardless of which employee made them. Some business accounts offer advanced reporting features that will help with VAT calculations.

Business Card Disadvantages

Despite these advantages, there are a couple of major disadvantages to business credit cards. For example, if an employee accidentally or deliberately reveals card details, there could be expensive transactions on the account. Even if the employee has committed a fraud, the business may still be liable. Such situations can also take a long time to sort out.

The other potential issue is the same for business credit card holders as it is for personal credit card holders. Money spent on a credit card is actually debt. With preferential interest rates and long interest free periods, business owners will need to make sure that they don’t get into a cycle of debt. This could seriously damage the long term financial health of their business.

Other Business Finance Options

For this reason, it is also worth considering other financing options for the business. A business debit card, for example, keeps tight control of access to the account. In addition, business owners cannot spend more than they have in the account, unless they have agreed an overdraft facility. A business loan is another option worth serious consideration. Whichever option business owners go for, it is essential to manage finances prudently and avoid getting into long term debt.