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

Instant access savings charges can be high, says expert

Consumers who open an instant access account should be aware that although they can withdraw their money without notice, some banks will charge them for doing so, according to a financial analyst.

Michelle Slade of Moneyfacts, a personal finance website, has said that as many as one in four banks charge their customers hidden penalties for taking money out of an instant access and no-notice savings account.

Last month, Nationwide published research on savings accounts which showed that 84 per cent of consumers believe there should be no penalty for withdrawals and 54 per cent say it is very important or essential that there is a no-notice period.

Ms Slade says: “The term ‘instant access’ is not misleading, but some would say that they should not really be charging a penalty just for you taking your money out, especially as some of the charges really are quite high.”

According to the analyst, some accounts either reduce the interest or do not pay it for the month in which a withdrawal is made.

Tags: banks, withdrawals, moneyfacts, business, penalty, access

50+ landlords warned over tax

The number of people aged over 50 who own a buy-to-let property is set to surge in the coming year.

That is according to over-50s expert Saga, which believes we will see a 24 per cent rise in the number of older buy-to-let owners.

As a result, it is urging people to take advice on tax and make sure they are properly declaring their rental income.

It also urges over-50s to ensure that they are taking full advantage of the tax relief that is available to them.

“It is no surprise that over-50s own the majority of second and rental properties in the UK, however, as more and more decide to follow this route, it is important that they understand the tax implications that rental income will have,” commented Andrew Goodsell, chief executive of Saga.

Landlords have until June 22nd to declare underpayments in their tax to HM Revenue and Customs and this will lead to a 90 per cent reduction in the penalty charged.

Buy-to-let owners are being warned that they should urgently seek advice or else face the prospect of having to pay a full charge.

Tags: Andrew Goodsell, rental properties, tax relief, HM Revenue and Customs, over-50s expert saga, penalty

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

Tags: charges, credit, holiday, cards, cost, withdrawel foreign, hsbc, penalty

Insurance premiums could fall for those with penalty points

In the past UK motorists that have clocked up penalty points on their driving licences have seen the cost of their vehicle insurance premiums rise quite considerably as a result of this.

However, according to recent reports from insurance companies points that have been accrued through speeding will no longer result in rising premiums, as speeding will no longer be viewed by insurance companies as signifying that the driver is a greater risk on the roads.

Insurance companies have revealed that points accrued through speeding have become so common that there is little point viewing these drivers as a greater risk on the roads. This means that many UK drivers with points on their licence as a result of speeding may find that their insurance premiums start to fall. Some insurance companies have announced that those drivers with up to nine points on their licences will now be treated as those without any points in terms of insurance premiums.

In the past, these drivers could have seen their car insurance premiums rise to four times the amount of standard premiums. Swinton Insurance has been the first to make the announcement about the fall in insurance premiums for those with points, and it is expected that other insurance firms are set to follow in the footsteps of the insurance giant.

An official from Swinton Insurance stated: ‘Penalty points used to be the yardstick for dangerous drivers, but with up to 10million drivers collecting them, they are so common place that they have almost become pointless. We will be looking at each driver as an individual and not automatically upping the cost of their premium if they have six penalty points on their licence.’

Tom Smith
4th June 2007

Tags: fall, premiums, discount, dangerous, cheaper, penalty, collect

UK banks investigations widen

Regularity bodies in the UK are set to widen their studies into banking and bank charges after months of investigations into bank charges have already been carried out.

The Office of Fair Trading and other financial regulators in the UK have been looking into the fairness of extortionate charges for exceeding an overdraft, having a returned cheque, or having a returned direct debit. Banks have been charging up to forty pounds or more in some cases in these situations.

The bank charges have been branded unlawful and unfair by regulators, and as a result many consumers have been able to reclaim their charges going back up to six years, and sometimes amounting to thousands of pounds. The OFT is likely to make a decision later this year on what is deemed a fair charge for administration that costs the bank between £2 and £5. In the meantime, consumers continue to try and reclaim their past charges.

Now that the study and review has been extended it is being described as one of the largest investigations into banking ever carried out. As part of the extended investigation regulators will be looking into the costs of banking, how the end of free banking might affect consumers and the economy, and will also continue to assess the fairness of bank charges. It is thought that placing a low ceiling limit on these charges could result in many banks charging all customers a monthly fee for holding a current account.

With regards to extending the investigation one OFT official stated: “This will provide the necessary context for assessing the fairness of unauthorised overdraft and returned item charge before we apply the law in this area.” 

A National Consumer Council official also commented on the situation, stating: “Banks must deliver a fair deal for consumers and stop dragging their customer service reputation further into the mud by waiting for regulatory action.”

Tom Smith
15th May 2007

Tags: oft, fees, regulators, costs, bank, accounts, penalty

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

Tags: credit, penalty, charges, costs, cards, issuers

Banks extend credit card cash advance charges

Customers are being urged to be as savvy as possible when using their credit card, with many providers believed to have extended the remit of cash advances.

Such an action could be tough on consumers, with the interest rate on purchases such as gift vouchers and online betting often being double that of usual cash transactions.

Nick White, director of financial services at price comparison site uSwitch, has described the way in which cardholders are being “bamboozled” by the banks’ tactics.

“They don’t know whether they will be charged at the much higher cash withdrawal rates on a whole raft of credit card transactions unless they scour the small print in their terms and conditions,” he told This is Money.

The measures are believed to have been implemented by many financial providers to recoup finances as a result of an Office of Fair Trading decision last year, which compelled banks to cap penalty fees at £12.

According to the Association for Payment Clearing Services, cash withdrawals on credit cards in the UK totalled £8.22 billion last year.

Tags: Association, penalty, Clearing, advance, uswitch

1m drivers on brink of ban

More than one million Brits are very close to losing their driving licence as the UK’s roads become more closely monitored.

Research by Direct Line Car Insurance shows that 4.5 million drivers have points of their licence for speeding, with 21 per cent of these being just one conviction away from a ban.

That is a four per cent increase compared to 12 months ago and the insurance firm is concerned that many people risk losing their livelihood as a result.

Direct Line claims that 14 per cent of drivers could see their livelihood seriously affected by a driving ban and with 6,000 speed cameras currently monitoring the UK’s roads this is a real issue.

Around 92 per cent of motoring convictions handed out in the last two years were for speeding, with a collective £300 million being paid out in speeding fines in the last three years.

“With the advent of speed cameras and the introduction of points for being caught for driving using a mobile phone, we urge motorists not to break the law as they could face numerous consequences such as killing or injuring themselves or others, disqualification, job loss and financial loss,” commented Emma Holyer, Direct Line’s motor spokesperson.

The government has proposed a new law which will see drivers who are caught travelling at 10mph or less over the speed limit receiving a less severe penalty.

This has received widespread support from drivers and motoring bodies, with Direct Line saying that it gives the proposals its full support.

Tags: issue, insurance firm, UK's roads, loss, speed limit, penalty, Insurance, Road transport

Lloyds TSB’s annual credit card charge

People with a Lloyds TSB credit card that they do not use regularly face being charged for the pleasure of owning one.

It is the first sign that banks may be seeking to recoup the money they are likely to lose as a result of pressure to cut penalty charges, as predicted by research firm Defaqto this week.

The bank has announced that people who do not use their credit cards will be hit with an annual charge of £35.

However, Lloyds has failed to reveal what they define as low-usage, meaning many people may find themselves in a state of limbo.

People who have a card but do not use it at all have been told in no uncertain terms that they will be charged and are being advised to cancel the card and destroy it.

“It costs the bank money to issue cards to customers who are not using them. This is intended to get them to start to do so,” a spokesperson from the bank told the Guardian.

In a bid to tempt consumers into using their cards more often, Lloyds is offering zero per cent interest on all purchases until May this year.

Earlier this week Defaqto’s head of banking, David Black, said that he would be “very surprised” if free banking was still available in the UK in two years time.

“The first major provider to introduce charges for all customers is going to take a lot of flak but it is likely that the majority of the main providers will then follow the lead,” he said.

If you have an unused credit card with Lloyds TSB make sure that you cancel it and, for security reasons, cut it up before throwing it away.

Tags: limbo, Credit Cards, majority, research, penalty, provider