New rules set to come in for credit card companies

The start of 2011 will see new rules come into force for credit card providers, which will means that changes will have to be implemented with regards to minimum repayments on credit cards as well as on how repayments are allocated to the debt that is outstanding on credit cards.

It is thought that the changes that are brought in from this weekend coming will have a positive effect on millions of credit card users, as it means that they will pay off their credit card debt more quickly as a result of changes made to the minimum repayments, and also that they will save money on interest because card provider will have to allocate repayments to the most expensive debt first rather than the cheapest debt, as many do at present.

However, whilst the changes will come as good news for many consumers industry officials are warning that credit card firms could be sneaky in their tactics to try and recoup money. This could see some credit card firms hiking up interest rates to make more money from customers, and some may add on sneaky charges and fees.

The biggest change, and the one that will most benefit consumers, is the fact that credit card firms will have to allocate repayments to higher interest debt first before the cheaper debt. This could make a huge difference to the amount of interest that is paid by consumers.

One industry official said: “The new regulations and changes that have been brought in will be highly beneficial to credit card users, and could make a big difference to the amount of interest that they pay. However, it will also make credit card firms sit back and think about how they can make back their losses, so consumer need to remain vigilant.”

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Reducing your credit card debts

Over recent years the UK has become a nation that has become more and more reliant on using plastic to pay for items. There are many reasons why people turn to credit cards for their purchases. Credit cards are far more convenience and far easier than having to carry cash around or deal with cheques. Credit cards also enable us to make purchases without having to pay up front, and we can even make purchases and spread the repayments, fuelling the buy now and pay later culture that has become so popular in the UK. Read more

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Improve your credit rating, advises expert

People who do not have a very good credit rating should make an effort to improve it, an expert has advised.

Richard Brown, the chief executive of Moneynet.co.uk, has said that lenders will not want to give out loans to consumers who have poor credit ratings, regardless of their job or earnings.

“At the moment, lenders are only really lending money to people who are demonstrating that they can repay it, so the ground rules have changed dramatically in the last 12 months or so,” Mr Brown commented.

He advised people with poor credit ratings to make an effort to improve them by making regular repayments on loans every month and trying to pay off more than just the minimum amount.

According to Credit Action, the average amount of interest paid by each household on their total debt is about £3,790 a year, which is up by £343 from a year ago.

Tags: finance, Loans, ground, Credit Action, debt, credit, repayments, credit rating

Business credit cards V charge cards

If you run or own a small business you will probably know how difficult things can become when cash flow problems arise, and this can make it difficult to make purchases for your business as well as carry out other basic transactions. You will also know how messy and troublesome dealing with petty cash can be in terms of trying to tie up purchases and receipts, keeping petty cash slips in check, and dealing with the administrative side of petty cash transactions. Read more

Tags: business charge cards, Financial transaction, business credit cards, cash flow problems, retailers the ability, repayments, increasing security, business credit card

Personal debt soars

Britons are paying a whopping £93 billion a year in interest on borrowing, it has been reported this week.

That is an increase of £12.7 billion on the figure for the same time last year, raising widespread concerns that many people are going to be unable to manage their levels of debt.

Increasing domestic fuel bills combined with tightening borrowing conditions – and the short-term effect of Christmas spending – have led to a particularly tough environment.

The average household now pays £3,744 per year in interest on borrowing alone – an increase of £517 compared to last year.

According to uSwitch, which carried out the research, around one in four people acknowledge that repayments on their debts are not manageable.

Accountants KPMG have also warned that personal bankruptcies are likely to increase to 130,000 in 2008.

Spokesperson Mark Sands told the Daily Mail: “Those in difficulty will find that their options are becoming limited.”

Tags: Financial services, Christmas spending, personal debt, spending, repayments

Credit card protection ‘important’

Consumers who use credit cards on a regular basis should look to take out payment protection insurance (PPI), it has been advised.

Shane Craig, managing director of Paymentcare.co.uk, has suggested that PPI can be as important for credit cards as it is for personal loans.

He acknowledged that currently more people were taking out PPI for loans because the amounts were often higher than the average credit card balance.

However Mr Craig advised: “For people who tend to max up their credit cards, protection is just as important.”

“With credit cards being the most expensive way of borrowing money, the cumulative effects of not being able to make your repayments are punitive,” he added.

Mr Craig went on to confirm that payment protection on any borrowing was something to consider because events such as job loss and illness can come completely out of the blue.

In December 2005, 47 per cent of consumers had unsecured borrowing of £10,000 or more. The average household owes £7,650 and the overall British consumer debt is £1.3 trillion not counting mortgages.

Tags: Insurance, borrowing, cumulative effects, december, credit, repayments

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

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Negative payment ‘fiddling’ widespread

Recent research shows that a staggering 296 out of 300 credit card providers use a negative payment hierarchy.

According to Fool.co.uk, 99 per cent of people with a regular balance on credit cards with varying interest rates on debts are being ripped off by their provider.

“It is not illegal to fiddle with the order in which payments are allocated on credit cards. But negative payment hierarchy is a devious way to exploit customers’ inexperience,” said David Kuo, head of personal finance at the finance site.

“Our study shows that whilst the vast majority of card providers employ this sly practice, Nationwide and Saga should be applauded for their use of ‘positive’ payment hierarchy,” he added.

Those particularly at risk from negative equity payments are people using zero per cent credit cards for balance transfer as well as purchases and cash withdrawals.

Repayments made on the card will then go towards pay off debts with the cheapest interest first, while debts with heavier interest are left to stack up interest charges and earn the provider money at the cost of the card holder.

Nationwide have revealed that consumers could pay an estimated £500 million on interest without knowing before banks are required to outline the order in which payments are made next year.

Tags: credit, inexperience, hierarchy, economics, repayments, pay, negative equity payments, money

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

Tags: cards, repayments, student, debt, credit, interest, owe, Loans

Could bankruptcy be the best option for you?

Most people are only too aware of the concerns over the UK’s growing debt mountain, and over recent years an increasing number of consumers have found themselves with growing levels of debt in the form of credit cards, loans, store cards, and more.

As a result of this many have struggled to keep up with repayments, a matter which has been made worse by rising interest rates and repayments for those with variable rate loans and mortgages. The UK has seen levels of bad debt and insolvencies rocket over recent years, with an increasing number of people teetering on the financial brink because of their debts.

One debt charity, Credit Action, has stated that despite the stigma and the potential problems that are linked with bankruptcy many consumers that are having real debt problems could actually benefit from wiping the financial slate clean and declaring themselves bankrupt. The charity has pointed out that bankruptcy is not an easy route, nor is it the right route for everyone. However, as a last resort for those in severe debt that can never be repaid it can be effective and can give them the fresh start that they need.

Credit Action officials do point out that the consequences of bankruptcy can be far reaching, and getting future credit could prove impossible for many. However, one official from the charity stated that although it is not a step that should be taken lightly it is a course of action that could prove the most effective for some people.

He stated: “Bankruptcy is really the option of last resort, but for some people it is the right thing to do if they’re never going to be able to pay their debts back.”

There are other alternatives available for those with a high level of debt who are experiencing difficulties making repayments. This includes Individual Voluntary Arrangements, which are considered to be a softer alternative to bankruptcy, informal arrangements with creditors, and debt management plans. 

Tom Smith
20th September 2007

Tags: Loans, debt, bankruptcy, idividual, repayments

House price growth slows down due to interest rate hikes

According to recent reports there has been a slow down in the growth of house prices in most areas of the UK following further interest rate rises in the first half of the year. Exceptions to the rule are Scotland, Wales, and the West Midlands in England. However, in most regions house price growth has slowed down by around 50%, and it is thought that this is due to lower demand for properties as a result of rising interest rates.

The data comes from the monthly report from the Royal Institute of Chartered Surveyors, and this report is the second one in a row that indicates a slow down in the rate of house price growth in most parts of the UK. According to the figures just 10.6% more members from the RICS reported a rise in house price growth rather than a fall last month, and this compared to 22.5% in the previous month.

The report also indicated that the number of enquiries from new buyers had fallen at the fastest pace since February of last year, reflecting the lower demand for properties. According to the RICS the five interest rate rises over the past year – and in particular the last two interest rate rises – have taken their toll when it comes to buyer demand, with many people having to reconsider property purchase because of the higher interest rates and sky high repayments.

One spokesman from RICS stated: ‘House prices have finally started to cool significantly for the first time since the recent mini boom in the housing market got under way in 2006. Interest rates hikes have begun to affect the psychology of the market with potential new buyers starting to think twice before buying a home. The July rate increase may not mark the peak of the current interest rate cycle and earlier rate rises have yet to fully filter through. A softer landing for the housing market is in store as we move into the autumn.’

Tom Smith
31st July 2007

Tags: rises, england, repayments, rate, bank

Bank Considers Latest Rate Decision

Since the last announcement on 10 May when rates increase by a quarter of a percent to 5.5% there has been a lot of speculation about the way interest rates may go in June.

The latest forecast is for rates to remain unchanged, but another quarter percent rise is still possible. At 5.5% in May rates went up to their highest level since February 2001. Read more

Tags: interest, england, rise, rates, deals, repayments, increase, home

Household spending rises

We are spending more on household appliances such as kettles and fridges.

That is according to Halifax Credit Cards which points to a disparity between how much we spend and how much appliances cost in comparison to previous years.

The firm points out that in 2005 we spent an average £4.32 on appliances per household every week.

In 1995, however, we spent just £3.62 per week yet the cost of household appliances has fallen by 15 per cent in that time.

Halifax has calculated that we now spend 29 per cent more on appliances than we did ten years ago but we are getting more for our money as prices have plummeted.

The firm says that many consumers are choosing to pay for their household appliances with a credit card as they see a number of benefits when buying items in this way.

“When purchasing household items there is nothing more disappointing than the item not being delivered or finding it to be faulty,” commented Ken Stannard, head of Halifax Credit Cards.

“When purchasing with a credit card, all appliances over £100 are covered by Section 75 which means we will give you a full refund if the goods do not arrive or are found faulty.”

Although there are some clear benefits of paying for products with a credit card it is imperative that consumers ensure that they can keep up any repayments to avoid falling into a spiral of debt.

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