1stop Finance Shop Web Blog

Banks have increased their onslaught of credit card customers to offset losses due to increases in bad debts and the cap on overdraft fees.

“The tactics used include the magically appearing annual membership fees, charges for pseudo-cash products such as credit-card cheques, and hidden catches in balance-transfer deals.

The banks have been playing a sleight-of-hand game with their consumers for years. Now it has stepped up to levels that catch most consumers off-balance. In fact, many consumers build up hundreds of pounds of ‘hidden’ charges before they catch onto the bank’s ploy.

One of the biggest tricks is the five pound scheme. The credit card has no minimum balance each month.  Instead of a minimum monthly repayment the customer pays the monthly interest, plus premiums for payment protection insurance, plus fees, plus £5. However, this means that the average person never actually repays any of the capital from one year to the next.

Another scheme pays of the least expensive debt first.  The more expensive debts accrue more interest for longer periods – and of course, the interest is often calculated on the full total of the purchase until paid in full.  This means that all the small purchases are repaid quickly, leaving the large payments languishing on the card for months, or years.

Credit card, and most unsecured loan debts, have higher interest rates than personal loans.  Some unsecured loan debts are currently as high as 25%, and expected to increase at least one more time this year.

Consolidating bills is not an easy task, especially if you have a lot of debt.  The more debt you have the harder you may find it to obtain a debt consolidation loan at a low interest rate.  If you are not careful when selecting a consolidation loan, you could end up deeper in debt.

As you are searching for a consolidation loan, you must make it your goal to search for a loan that will lower your overall costs.  To accomplish that, you will want to find the lowest interest rate possible and have a plan to pay off your debt in three to five years.

Using credit cards to consolidate your debt is one type of loan that you can use if you do not have a large amount of debt.  Consolidating your debt on a credit card will require you to find a card with enough credit limits to cover the entire amount of the debt.  If you take out a personal loan for less than £2,000 you may find that the interest rate will be higher than if you take out a larger amount.  So if you require a loan less than £2,000, you may want to consider a credit card, because if you have a good credit rating, it will be likely that with a credit card you will be able to find a low interest rate, or a 0% introductory interest rate.

Another way to consolidate your loans is through a traditional debt consolidation loan.  A consolidation loan is sometimes an unsecured personal loan that does not require any security and is considered a risky loan to lenders and are usually more expensive and not easy to get if you have a lot of debt.  A secured personal loan will require you to provide collateral, such as your home, which can prove risky to you if you are not sure if you will be able to meet the monthly repayments.

You could also seek credit counselling or debt settlement, where you will have the assistance from agencies that will negotiate with your lenders to lower your monthly payments.  They will also help you to build a budget and come up with a financial plan to help clear your debt.  However, these services come at a cost, although there are agencies that do not charge you, you will end up paying with a bad mark on your credit rating.

If you are a student in Uni, you are probably busy concentrating on your studies and trying to get an education that can benefit you for the future. A proper financial education is not one of the most important things on your mind.  However, it is during your time as a student that you should start learning the basics of managing your finances.  By learning how to properly manage your finances early on, you will then be able to properly manage your finances in the future and start off your life with little or no debt.

If you own a credit card, you will want to avoid using it, except in emergency situations.  If you do use a credit card, then you will want to make sure that you pay off your balance each month.  Carrying a balance on your credit card will cost you extra in interest, so paying off the balance before the interest-free period will save you.

If you are paying bills, such as utility costs, you will want to make sure that the bills are paid on time.  By paying your bills on time, you will start building your credit history and a good habit.  If you fail to pay your bills on time you will be charged late fees, which can easily add up.  To ensure payment on your bills, you can set up a standing order or direct debit. A good credit history now will help in later life when you need a personal loan for buying a car or a mortgage to buy your first property.

Finding a good bank account is important, and because several banks offer discounts on student accounts you shouldn’t find it hard to find a good account.  You will want an account that will offer you an overdraft and a good interest rate.  It pays to shop around, so before settling for a bank, make sure that you check out what other banks are offering.

Are you are feeling weighed down by the debt on your credit cards and wondering how you will ever be able to pay off the debt with the amount of interest that you are currently paying on your card?  Maybe a credit card offering a 0% interest rate on balance transfers may interest you.

The way a balance transfer works, is when you find that the balances on your credit cards are becoming harder to pay off. Maybe the current interest rate you are paying on your card is too high so you want to start searching for a lower interest rate.  As many credit card companies offer a 0% interest rate for an introductory period you will easily find a credit card that you will be able to transfer your current balances over to.  If your application has been accepted and you receive the 0% interest rate credit card, you will then want to immediately phone your original credit card company to have the balance transferred.

When you phone the credit card company, you will want to have information on your current credit cards on hand, as you will be required to give the new card company information such as the amounts that are to be transferred, the name of the credit card company and the account number.  The credit card company will then phone the other credit card company to have the amount paid off and the balance will then be added to your new 0% interest rate card.

As you are searching for a credit card that is offering a 0% interest rate, you will want to first search for a card that offers the longest introductory period, which is typically 3-6 months, but there are some companies that offer 12 months; the longer the better.  If the card has a long introductory offer of 0%, you will then want to find out what the typical APR will be once the introductory offer is over, as you could end up paying the interest rate on the balance if it is not paid off by the end of the offer.  You will also want to find a card that charges little on the balance transfer handling fee, or has a cap on the amount that is charged.  Although it may be hard to find a card with all three benefits, if you search hard you will find a card that is right for you.

Debt statistics are updated monthly.  Government, banks, and loan firms use these numbers to determine how they do business.  Consumers can use these numbers to differentiate between ad copy - meant to sell products - and a real look at the UK economy

The total UK personal debt exceeded £1.25 trillion.  At the end of January 2007 it stood at £1,300bn. The growth rate increased to 10.5 per cent for the previous 12 months, or an increase of £114bn.

Total secured loan lending exceeded £1 trillion (£1,000 billion) and at the end of January 2007 it stood at £1087bn, an 11.5 per cent increase over the last 12 months.

The average household debt in the UK is £8,795 (excluding mortgages) and £53,701 including mortgages.  This is far less than IVA and debt management firms are claiming.  These numbers bring the supposed ‘debt mountain’ to a more manageable ‘hill’ – and corroborates the Bank of England’s numbers.

Average owed on loans by every UK adult is £27,638 (including mortgages). This grew by £200 in February 2007.

The average interest paid by each household this year is approximately £3,425 each year.

The average unsecured consumer borrowing via credit cards, motor and retail finance deals, overdraft loans and unsecured personal loans rose to £4,526 per UK adult at the end of January 2007.

Britain’s personal debt is increasing by £1 million every 4 minutes.

This paints a strong picture of the average UK consumer’s ability to manage their debt.  While many households are struggling under debt, many analysts believe that a good debt management councillor will serve most UK consumers better than an IVA firm.

If you enjoy travelling and do a lot of business or personal travel, then you may want to consider taking advantage of a travel credit card.  There are a number of different types of credit cards available to consumers, and one type of card is a travel credit card.  A travel credit card is also referred to as an air miles credit card, and offers the cardholder the benefit of gaining air miles for every purchase that is made.  The collection of air miles can then be redeemed for air tickets or travel discounts.

Travel credit cards are very popular amongst those who travel often, or travel far distances.  However, not all travel credit cards are the same.  There are some cards that will only allow you to receive air miles when air travel tickets are purchased on the card, while other cards give you air miles for every purchase that you make.  Other credit cards will usually offer a large up front air mile package where you receive a considerable sum of air miles on your first purchases, usually between 5,000-20,000 points.  So before you decide upon a travel credit card, you will want to familiarise yourself with the terms and conditions of the card.

As you are searching for a travel credit card, you should consider a few things, such as the interest rate on the card.  You benefit from a travel credit card, or any reward credit card by paying off the balance on the card in full every month.  Often travel credit cards, or any reward scheme credit card, offer higher interest rates than a standard credit card, and if you do not pay off the balance in full each month you will end up having to pay the higher interest rate on your purchases.  You will also want to consider things such as the expiration of the points. Often travel cards will only allow you to carry travel points for a specified length of time, which means that you will have to redeem them before a certain time.  So be aware of the expiration of your points, and how long they will last.   Remember to check the rates for borrowing money on the card - you may need to take out cash whilst abroad and this usually attracts a higher rate of interest and is always the last debt to be paid on a card.

Transferring debt from one credit card to another can be one way of helping you to manage your debt and pay it off quickly.  This is known as a balance transfer.  There are many credit cards on the market that advertise 0% on balance transfers.  If you find that your current credit card rate is too high for you to make an impact on reducing the balance, then you may want to consider transferring your balance to a credit card offering a 0% introductory offer.

If you are currently being charged a high interest rate on your card, and you are unable to make a dent in the balance because of it, you will find that you will benefit greatly by switching cards.  Before you switch cards, you will want to ensure that you are eligible for the offer.  If you are, then you will want to find out how long the 0% interest rate is being offered for.  Some companies offer a 0% interest rate on balance transfers for 3 months, 6 months, or even 12 months.  So it will pay off to shop around and find one that will offer a longer interest rate period.

Another thing to look out for when comparing offers is the handling fee that credit card companies will charge on balance transfers.  Although the interest rate may be 0%, the company will still charge a percentage for handling fees.  Often these fees can range from 2%-4% on the total amount being transferred.  You will want a card that will offer little or no handling fees on your balance transfer.  You will also want to be aware of any additional charges that the card company may charge you, and make sure you are aware of the interest rate that will be charged once the introductory rate offer expires.  Often the interest rate can be extremely high, so be aware of them.

If you are a student you will find that obtaining a loan can be extremely difficult.  It is difficult for students to obtain loans because most students are not employed full-time and do not have a sufficient level of income to meet the repayment requirements.  Many lenders consider lending to students risky, as they have to security to secure a loan, and majority of students to do have a full-time job to support the repayments of the loan.

However, if you are a post graduation student, most lenders will be willing to offer an unsecured loan to you.  Although the interest rate is higher compared to basic loans, lenders will work with the students to determine what monthly payments the student can make.  If you are a student and work a full-time job, then lenders may offer you a lower interest rate.  Lenders are more willing to allow post graduation students to borrow a sum of money if the student has employment after the school term.  Students who provide a work contract to work for a business after they graduate is a form of security for lenders.

If you are a student and require a loan, and are unable to obtain an unsecured loan from a bank or building society, there are other options.  You can look into the possibility of payday loans if you have a current bank account and a steady job, whether it is part-time or full-time, you just need proof that you are working, such as pay stubs.  Another way you can borrow is through credit cards.  However, this can be risky as you can easily fall into debt using credit cards, and if you have no credit history, credit card companies will more than likely charge you a high interest rate on the card.  If you are looking for additional funding for your schooling, it is best for you to shop around and compare prices, interest rates, and benefits from various lenders to ensure you get the best deal.

Millions of Brits are now deep in debt and not ashamed of owing money. In fact, it is more of a stigma to rent and remain out of debt, or even build wealth, than it is to be hopelessly in debt and forced into bankruptcy.

Debt is now the norm in the UK. Teenagers start to build debt while still at school, and not on student loans, but on clothing and luxury items.

College students owe an average of £28,000.

Married couples owe their combined wages for four to five years to come. In many households, this debt excludes the mortgage.

The current figures claim that the UK personal debt levels increases £1,950,000 every 3.85 minutes according to Credit Action, a national money education charity.

“Our passion is to help people stay in control, rather than let money control them and disrupt their lives through over indebtedness,” says a spokesperson.

A Conservative Party poll suggested that as many as 9 million people are struggling to cope with serious debt problems. However, the Bank of England counters by claiming that 53 per cent of the people they polled expect to clear their debts by the end of 2007, excluding their mortgages.

This is hard for some watchdog groups to believe.  Currently, there are more credit cards than people.  APACS states that, in 2005, there were 74.6 million credit and charge cards compared with 60 million people.

The Financial Services Authority said that almost a third of all teens and young adults between 16-24 years old cannot manage a weekly budget.

The Authority, a statutory body set up under the Financial Services and Markets Act, said that 94 percent of all 16-year-olds believe it is important to know how to manage money, but only 53 percent are taught how to do so.

Gold and Platinum credit cards are cards that are typically offered only to those who have a high income and also to those who have a good credit history.  Some people view gold and platinum credit cards as a certain status symbol.  These types of credit cards offer higher credit limits than a standard credit card, and often offer lower interest rates and benefits.  Here are a few gold and platinum credit cards currently available on the market:

MBNA
The MBNA is a platinum plus visa and is currently offering a 0% balance transfer for 12 months and 0% interest on card purchases for the first 3 months.  The typical APR is 15.9% thereafter with up to 56 days interest free period on purchases.  There is no annual fee, but there is a 2.5% handling fee for balance transfers.

Royal Bank of Scotland
This gold card offered by the Royal Bank of Scotland is currently offering a 0% balance transfer for 9 months and 0% interest on card purchases for 9 months.  The typical APR is 14.9% on the card with an interest free period of up to 56 days.  This card is available to those who are over 21 and are earning £20,000 +.  The rewards offered by this card include travel discounts and wine club offers.

Barclaycard
This platinum card offered by Barclay’s is offering a 0% balance transfer rate for up to 13 months and 0% interest for 3 months on all purchases.  The typical APR on this card is 14.9% with no annual fee. Benefits from this card include free fraud protection, worldwide assistance and identity protection services.