All About Loans Weblog

In the wake of the credit crunch it would appear that many credit card companies are increasing their interest rates on all customers. Customers who have borrowed large amounts and always meet their monthly repayments appear to be at most risk of seeing their interest rates go up by as much as double.

It would appear that the worst credit card firms for increasing their interest rates in recent months are the American owned ones. MBNA and Capital One are now charging some of their borrowers as much as three times more than the typical rate they advertise.

Capital One has stated that it is increasing the rates for many of its customers due to the changes in market conditions. However many critics are accusing the card companies of profiteering from customers’ misery.

Other MBNA customers have reported that after seeing their interest rates more than double they complained. However while MBNA did reduce rates they did not bring it down by the amount they had increased it.

Many people are now deciding to dump their cards if they are being treated unfairly and move to another lender.

If you have a large balance than you are best transferring to a card with a 0% offer or a card that promises a low rate for life. This stands for all customers. If you can switch to a card that promises a low rate for life than you should. This may not be possible for those customers holding large balances, in which case a cheap loan is the best option. It may not offer you the prospect of further borrowing, but a loan cleared even at the lowest rate will still be cleared sooner than a card paid off by minimal amounts each month.

Mint is currently offering a card with 0% balance transfer till January 2009 which then reverts to a rate of 14.9% along with a 2.5% fee.

News in from the British Retail Consortium (BRC) suggests that customers are shunning plastic and turning back to good old cash.

A survey conducted last year showed that 60% of purchases were made by cash, compared with 54% in 2006. The figures released did not offer a break down by month or quarter, so we can only speculate that most of the upturn in cash spending occurred in the latter part of the year, once the credit crunch had started to hit.

However, even before the prospect of recession was spoken of, most financial experts agreed that consumers were slowing turning away from credit cards and personal loans to fund their spending.  When the sub-prime lending crisis hit America, consumers were already getting twitchy about the ‘culture of lending’ headlines popular in the news and starting to review their desire for easy credit.

Many customers are still very happy to take out a loan for a holiday, new car or even just a spending spree, but lenders agree that most of the clients approaching them at the moment are looking to consolidate debt or lessen their debt burden.

With the cost of living rising, most sensible borrowers are now looking at ways of cutting their monthly expenditure - hoping to swap their high interest credit cards for a cheap loan.

It is no wonder that the BRC find that people currently prefer to spend the money in their pockets, rather than use plastic. With a credit crunch reality, fast rising living costs and wages static, people no longer want to borrow today and worry tomorrow, because they are already worrying.

These days everyone buys on credit. Britain’s love affair with credit cards and cheap loans has driven so many of us into deep debt over the past decade. So if you are thinking of getting a new credit card it is important to choose the right one for you since there are so many options available. You have to think about the type of person you are before you take out a card.

OK, I know I sound crazy, but seriously there are so many options out there you really need to get one that suits your needs otherwise you might find yourself building up debt.

Think of it like this; if you are the type of person who always pays your bills on time but needs a card to buy things online then it doesn’t really matter what the interest rate is since you will be expecting to always pay your bill off before the end of the month. Look for a card that has no annual fee or one that offers some sort of bonus for using it. This way you will really only gain from having a card, however make sure you always pay your bill on time since your interest rate might be high.

On the other hand if you are the type of person who doesn’t always pay on time then look for cards with enticing offers. The best offers out there include zero percent interest on balance transfers and purchases as well as giving you up to 59 days between buying something and having to make a payment.   These sort of deals can be good for people wanting to move loan debts currently earning high interest. A loan can be cleared this way and paid quicker as more money is going on the capital and none on interest.

Many credit card holders who are customers of Natwest have accused the bank of introducing stealth charges without giving its customers much notice.

Natwest, the second largest provider of credit cards in the UK, has changed how its reward scheme works for its air miles reward programme, YourPoints.

Part of the change in the way the card worked now means that cardholders have a £3 charge automatically charged to their account unless they spend more than £1000 on the card in a month.

While the scheme for the card was introduced last June the additional charge was added in December. Many customers have claimed that this charge was added by ‘stealth’.

Natwest has denied that the charges are stealth, claiming that the charges were flagged up in the customer information pack which they received when they signed.

Natwest has claimed that the charges were not introduced by the bank for six months because it wanted customers to familiarise themselves. However many customers have claimed that Natwest was being very crafty with the card by introducing the extra bill around Christmas. This meant that many people were going to be busy with all their deals and possibly miss out on the fact that an extra charge had been introduced.

A Natwest spokesperson has stated that: “We refute any claims suggesting that we have not informed customers appropriately. All customers who are receiving a £3 monthly fee have previously been advised of this fee and have actively chosen to opt-in to the YourPoints scheme.”

Customers of all credit cards would be advised to check the small print and to beware of using cards as form of borrowing money longterm. Cards not paid off monthly attract heavy charges in the long term and borrowers would be advised to move the debt to a cheap personal loan.

A yearly holiday trip is something that everyone looks forward to and prepares for, however one thing that most people fail to do is prepare themselves by knowing how to protect their cards while overseas.  Millions of Britons are placing their bank accounts at risk of identity fraud by not taking precautions while on holiday.

Holidaymakers go on holidays to escape the everyday worry of work and bills and daily routines and get away to relax and enjoy new experiences.  However, this relaxed attitude means that many cardholders end up being a bit too relaxed with their credit cards as well, placing themselves at risk of identity theft.  With you no longer on guard, fraudsters are able to steal details of your accounts and use that information to open new credit card accounts, loans or bank accounts.

Research has found that only around 42 percent of Britons take all the necessary precautions to protect their identity while on holiday.  Another 23 percent claim that they have never even thought about protecting themselves while on holiday.

With cases of fraud on the rise, it is important that everyone takes precautions and ensures that their identity is protected.  So before you leave on your holiday it is important that you lock away all your important documents and stash them in a safe place.  You will also want your neighbour or friend to collect your mail for you and keep an eye on your home.  While you are on holiday you should keep your boarding pass or any other document that may have any information about your identity, this includes receipts from credit cards or ATM machines.  You will also want to keep your passport in a safe and secure place at all times while on holiday.

By following this advice, you should hopefully only return with a tan and some great photos. Ignore the perils and six months down the line may be the first you know that your identity has been stolen by fraudsters. Often it is only when you are turned down for a personal loan or mortgage do you realise the damage done to your credit record.

Thousands of us are facing the risk of being unable to meet our mortgage repayments in the coming months as the recent increases in interest rates finally start to be felt.

There have been five rate rises over the past twelve months and although the base rate dropped in December, the prior rate rises have added roughly £135 a month to the average mortgage in the London and the South East, where mortgages are on average £180,000.

The problem for many of us is that we are not only trying to repay our mortgages but also meet loan repayments and credit card bills, which have also seen interest rate rises.

Last year saw the highest number of house repossessions by lenders since 1999 with 27,100 of us seeing our house being repossessed. That’s a 21% rise on the level of 2006, and could be a warning for what’s to be expected in the next few months.

Michael Coogan, CML director general, said: “The number of repossessions is likely to be higher in 2008 as a result of wider issues in the economy and the mortgage funding markets.”

The reason so many of us have been caught out is because interest rates are far higher than many of us expected when we took out the loans. Financial experts are advising anyone who finds that they are struggling to make monthly repayments to not wait and see what happens, but rather act now before it is too late to do anything.

The spring is expected to send many of us who borrowed low rate fixed loan deals between 2002 and 2005 into financial difficulty as many of the deals are expected to expire shortly.

For most people, getting approved for a credit card or cheap loan didn’t used to be a problem. For years now, lenders in the UK were falling over themselves trying to get their customers to borrow more and more money, and credit card lending in particular simply soared as a means of getting a good return for the banks with very little effort. Therefore, for most people, banks have been more than willing to provide credit cards, however, not always at the rates and on the terms that customers would ideally choose.

However, with the current liquidity crisis in the financial markets, some people are beginning to fear that it is going to become more difficult to get access to credit. This, it is believed, will be especially true for people with poor credit ratings or poor credit histories. This is because the current crisis originated in the US bad credit loans, or ’sub-prime’ market which is based on lending to customers with poor credit ratings.

What this might mean is that lenders will begin to get more cautious about lending to customers who are seen as a higher risk. This would include those with poor credit histories as well as certain other high risk groups such as students. However, it appears as if there is still a lot of credit on offer from the market as a whole, and therefore, for those with good or average credit ratings, credit cards and personal loans should still be pretty easy to find.

There has never been a better time to find a credit card with a cash back deal as credit card companies up the stakes in their war for new customers but are we, the consumer, really getting a better deal.

It is estimated now that as much as one in every ten credit cards comes with a special offer with the average cash-back from one of these offers amounting to 0.72%.

So on average for every £1000 you spend on your credit card you can expect to get an average of £7.20 back on your cash-back offer.

One card recently launched that smashes all cash-back offers is Abbey’s new cash-back credit card which offers 5% cash back but this only stands for the first £1000 spent on the card and only if they money is spent in a major supermarket. Another deal out there turning heads is Capital One’s offer of 4% and the American Express offer of 3%.

Cash-back offers are often cited by credit card companies as a way of rewarding customer loyalty. However with an average offer of just 0.72% that is not much of a reward.

If you choose a cash-back card but fail to pay it back every month you might end up completely removing any reward you would have got through the higher cost of interest repayments, making it one of the most expensive ways of borrowing money outside of a pay day loan.

Many of the cash-back deal also only last for a short period of time which means that after the time period is up you might end up with a credit card that has a very uncompetitive APR as well as balance fees. If this is your situation, better to take out a cheap consolidation loan to clear the total and start afresh by paying off your card balance every month.

More and more of us are starting to feel the crackdown on penalty fees as credit card providers try and get back some of the money they have lost since the 2006 ruling by the Office of Fair Trading (OFT).

The ruling meant that card providers who had been charging fees that were higher than the legal limit would need to justify their action if they were going to charge anymore than £12. This was predicted by some experts to cost between £300m and £500m a year. Some providers have responded by introducing new charges.

Card companies are being very imaginative in the new charges they are slapping on their customers. One company has started charging £24 a year just for having a card while several companies have started charging low usage fees as high as £35. This means that even if you maintain a good credit status, you will be charged an extra fee to borrow money that you are also going to be paying interest on.

Another way they are making money from you is by dropping the minimum monthly repayment percentage. This means that in the long run you will be paying back more in interest. Balance transfer fees have also gone up with MBNA and Halifax charging 3%.

While credit cards companies have been introducing new charges, these are not sneaky charges. The charges will all be listed in the terms and conditions but it is up to the consumer to read them. It is likely that the majority of the charges will not affect most of us either. Make sure you choose the right card for your circumstance and you should find that you won’t be paying more than previous years.

If you notice that you are paying more on your credit card than ever before or are maintaining a high balance and paying off only the minimum then you are looking at a life sentence of credit. Most financial experts are unanimous in recommending a cheap debt consolidation loan for these clients.

Five consecutive interest rate rises over the past 12 months meant that households are now facing a record debt burden. Even now that the base rate has dropped by a quarter point, it will be a while before financial relief is felt by most UK households.

Recent research suggests that 19p out of every £1 earned by households goes towards repaying accumulated debt and the interest on that debt. Although this sounds grim, much of that debt is secured against property, rather than in unsecured loans and high interest credit.

The previous debt record was back in 1990 when debt accounted for 18p in every £1.  The burden of debt has been on the rise since 1997 when the figure was just 12p in a £1.

Even with the recent drop in base rate, the debt strain could get even worse by the end of the year. More and more of us could start to find it increasingly difficult to pay off our debt and more and more of our income goes towards servicing our debt. This is always true around Christmas and New Year when people spend beyond their income.

The reason we are feeling a real squeeze on our finances is not only because of increased borrowing but also because of modest earnings rises since 1997, rising utility bills, higher petrol prices and the increase in interest rates. All these things leave us with less real disposable income, but a sense of entitlement towards the ‘good things’ in life means that many families take out loans to finance holidays, cars and luxuries.

Despite the rising burden of debt (or maybe because of!) our spending has been rising also at an average rate of 5.5% per year since 1995. However growth in income has not been rising by as much and has only increased by 4.9%. The difference is made up be households borrowing more money.

If you are having trouble paying back your debt then there is always the option of discussing this with your creditors and coming to some sort of agreement. Early detection of financial difficulties is the best way of dealing with the situation. Debt consolidation loans offer a good way of re-financing at a lower rate over a different term and one monthly payment is easier to manage than several.