2.5 million accounts hit as banks tighten finances

New research has revealed that over 2.5 million credit card customers were either charged a fee, had their credit limits reduced or their accounts closed as banks tried to recover money lost through debts and penalty fees.

Of the customers affected by the new moves, only 16 per cent missed more than one monthly repayment or went over their credit limit in the past year, the study by uSwitch.com has found.

Simeon Linstead, head of personal finance at the company, said that banks should not close accounts, reduce credit limits or adopt annual or monthly fees without giving their customers a reason for doing so.

“We’re not against credit cards providers curbing consumers’ spending if their debts are genuinely getting out of hand,” commented Mr Linstead.

However, he added that credit card companies that “make changes to customers’ accounts must be completely open about how and why they have selected those customers.”

Controversial bank charges are set to be investigated by the Office of Fair Trading.

Tags: monthly fees, 5 million, Credit Cards, Credit counseling, penalty, hand, trading, credit limits

Don’t leave financial problems to get worse, says expert

People concerned about their financial situation should not simply leave the problem to get worse, warns a personal finance writer.

Cliff D’Arcy has said that tackling financial problems early will help people stay on top of their debts.

According to research by Monilink, 22 per cent of people have built up too much debt and are finding the repayments from month to month a strain.

Mr D’Arcy advises people to get in touch with their bank and credit card companies if they are facing financial problems as they may be able to freeze the interest or relax payments to allow customers to try to balance their budgets.

Another option for people who are worried about their debts is to contact a free debt counselling charity, such as the Consumer Credit Counselling Service (CCCS) or seek advice from a personal finance website.

Commenting on the help such organisations can offer, Mr D’Arcy said: “They have some very good advice written in plain English that will help you to deal with debt.”

Tags: writer, debts, relax payments, CCCS, Credit counseling, finance website, financial situation, Money Management International

Change your lifestyle to get good credit report, advises expert

People who have had their credit card applications turned down should re-evaluate their lifestyles and have a close look at their finances, Fool.co.uk has said.

David Kuo, head of personal finance at Fool.co.uk, said that people are often refused credit because they have too much debt compared to their income or because they have previously defaulted on credit card or other payments.

Earlier this month, MoneyExpert.com reported that 18,000 credit card applications are being refused every day and one in 14 people (seven per cent of the population) have had a credit card application rejected in the last six months – a total of 3.24 million applications.

According to a new survey by Citizens Advice, record numbers of people are seeking help with financial difficulties and many are struggling to pay their essential household bills.

“People need to re-evaluate their own lifestyles at the moment, have a look at their own finances and if someone turns you down for a credit card then ask yourself: ‘Why?’ The answer is in your credit report,” says Mr Kuo.

Tags: lifestyles, home, moment, Mr Kuo, Credit counseling, advice, answer, total

Spenders need to work out their budgets

Sitting down and working out your personal budget is the best way to begin reassessing your money, according to financial experts.

The Consumer Credit Counselling Service (CCCS) said that the most accurate way of accounting for spending is to make an annual budget and then divide it by 12.

Frances Walker, spokesperson for CCCS, said: “It is also a good time to look at income maximisation; making sure you are getting all the benefits and tax credits you are entitled to. There is lots of help out there, particularly online.”

She added that consumers in need of financial advice would be better off going to a debt advice charity rather than a bank.

“With banks they may just say ‘we’ll just give you one consolidatory loan‘”, she concluded.

According to Credit Action statistics updated on January 4th 2008, the total debt for the UK stands at £1,400 billion with the average household owing £56,234.

Tags: credit, debt, January, uk, consolidatory

Credit card users wise up to debt risk

A growing number of credit card users are becoming wise to the perils of racking up big debts.

With recent research showing that the average Brit spent a whopping £397 on Christmas presents last year, and that 76 per cent plan to spend even more this year, concerns about debt have been growing.

However, a new survey published this week shows that one in four shoppers are determined not to let the debt build up on their plastic.

The research was carried out by debt counselling service Thomas Charles.

Director James Falla told savespendborrow.co.uk: “People are starting to think: ‘what am I going to do when it comes to paying this back?’”

“They are being told that their houses aren’t rising quite so quickly in value, and I think those things are actually starting to filter through to the general public and they are thinking: ‘If I go on spending as I am, maybe I’m not going to be able to sweep it under the carpet by remortgaging, like I did before’.”

Nevertheless, while this is a positive sign, warnings were sounded earlier this week by Callcredit, which claimed that a large number of people in debt are “in denial” about their own responsibility for it.

Tags: Credit counseling, television, Brit, debt, cent, debts