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.

Several balance transfer deals have hit the market in an attempt to lure consumers who are struggling with the increased interest rates.  There are now over ten cards on the market that are offering over a year’s worth of free interest on balance transfer deals.  The Royal Bank of Scotland will launch a new card with a year’s free credit on switched balances, and HSBC will launch a brand new 12-month offer.

The launch of these interest-free balance transfer deals come at a time when interest rates are rising and making it harder for consumers to repay debts, especially for homeowners who are feeling the pressure of the increased interest rates. The credit card offer is a way for lenders to gain customers, especially at a time when the offer is most appealing.

However, for those consumers who are looking into a balance transfer card, it is advised that they check the Balance Transfer Fee, as it could be more beneficial for them to choose a lower balance transfer offer period if it comes with a smaller fee.

Almost all credit cards charge a balance transfer free which is typically two percent, but it can be as much as five percent on some cards.  Consumers are advised that when searching for a balance transfer credit card that they carefully read over the fine print and make sure that they understand all the charges that are involved with the transfer.  They should also make themselves aware of the card issuers interest rate once the period expires to avoid any surprises.

Consumers who are looking to consolidate debt or who are moving a high balance which they can only pay off incrementally would do better to consider a cheap loan. Any consumer can save themselves a good deal of money by looking over the figures carefully and seeing what the longer term picture is, rather than the short term gain.

A credit card is a prime tool to purchases different items, and is can be a useful financial tool to help build your credit.  A credit card can be used for a number of things, from making purchases online to paying monthly utility bills; a credit card is a convenient tool to make different purchases.  However, it is important to remember that a credit card should be used as a payment method, not as a means of unlimited wealth; never forget that money spent on a card is an unsecured loan that needs to be repaid.

If you are planning to apply for a credit card you will have a lot of choices for credit cards.  Depending on you intended use for the card, you will want to choose a card that you will benefit from.  Many credit card ads you see will claim that they offer the lowest rates with some even offering zero interest on their credit card.  However, these types of offers are almost always promotional offers that will last for a limited time, typically three to six months.  Once the introductory period is over you will notice that the interest rate will rise, so it is important that you research any card offers that you come across. If it seems too good to be true, it probably is.

When you are searching for a credit card you will first want to look for a card with a low APR, then you will want to look at any fees and charges that the credit card company may charge, such as late payments, annual fees or cash advances.  It is important that you choose a credit card with a low interest rate, especially if you think that you may carry a balance on the credit card.  You can find some of the lowest interest rate cards online at credit card comparison sites.

If you are like many people today who are drowning in debt, then you probably want to get out of debt and become debt free.  Whether you owe a lot of money or very little, any amount of debt is too much.  The longer you are in debt the more money you will lose in finance charges.  No matter how much debt you are in, becoming debt free should be your top priority.

To become debt free, you will first need to take control of the debt that you already have.  You can do this by consolidating your debt onto one card.  By transferring your debt to one card, you can effectively lower your interest rate and reduce the amount of finance charges that you pay each month.  You can also consider a consolidation loan, however if you have a small amount of debt, you may want to consider just transferring the amount onto a 0% introductory rate credit card.  With most consolidation loans you will be required to provide the lender with security, or collateral, such as your home.  Unless you are sure that you will be able to meet each monthly repayment, then you should consider using a credit card to consolidate your debt.

Transferring your debt is not the only way to become debt free.  You will also need to create a budget to help you overcome any debt and avoid falling back into debt.  With a budget you will be able to monitor your spending and be able to get rid of any unnecessary expenses.  With the money you save by cutting back on unnecessary expenses you will then be able to apply the money towards your debt.

At the end of 2005, there were 75 million credit cards in the UK, but only 48 million adults. But, one third of adults do not have a credit card, leaving 32 million consumers with more than two credit cards apiece. About 11 per cent of all cardholders only the minimum monthly repayments (MMRs) demanded by their credit cards

The Bank of England reported, at the end of January 2007, that borrowers owed £55 billion on credit-cards. More than 75 per cent of this unsecured loan debt is subject to interest with the typical on credit cards is 17 per cent a year, twelve percentage points above the Bank of England’s base rate of 5.25per cent.

There is fierce competition for customers. Some consumers are demanding a cut in their interest rate, and threatening to transfer their balance elsewhere. This works, unless their credit record is poor. A consumer with a good credit rating can expect to lower their interest rate to 10 per cent APR.

More than fifty card issuers offer interest-free credit on transferred balances for introductory periods lasting from five to thirteen months. However, transfer fees on zero per cent deals can outstrip the benefits.  Some firms are also forcing new clients to spend in excess of £100 in the first 90 days, which is not interest free.  This can also reduce the benefits of a zero percent interest deal.

It can take decades to repay a modest unsecured loan debt by paying minimum payment each month.

If you intend to sign on for a new credit card to take advantage of a 0% or low interest rate, there are a few things that you may want consider before transferring your balance.  The first thing you will want to search for is the time limit on the rate, what the zero percent interest rate really covers as well as any hefty fees or bait-and-switch schemes that credit card companies may use to lure customers.  If you are aware of things to look for, you will ensure that you will receive the best deal and benefit from the new credit card.

If you are signing on for a card that is offering a 0% interest rate for an introductory period, you will want to know when the 0% interest rate expires and what the new interest rate will be once the introductory period is over.  You will also want to be aware of any hefty fees that the credit card company may charge.  Most credit cards charge a certain percentage when you transfer a balance from another card, called a handling fee, and will charge anywhere from 2-5% on the total amount transferred.  However, most credit cards have a cap on the amount that is charged for handling fees.

You will also want to be aware of any credit card companies that lure you in with a zero percent interest rate only to end up giving you a higher interest rate that you may not realise you are being charged until your first statement arrives.  So be sure that you read the agreement of terms before you apply for the application. If you are applying for a card to consolidate debts, make sure you do not add more debt to the card, or this will start attracting standard rate interest. If you think you may be unable to resist more spending, you would be wiser to take out a low rate personal loan.

Moneyfacts.co.uk said banks and credit card providers have seen a severe loss in revenue as a result of the Office of Fair Trading’s (OFT) decision to limit fees passed on to consumers.

Six credit card companies made major changes to their cards in the last two weeks. in a bid to recoup losses. Changes include interest rate increases, as high as 10 per cent on cash transactions, to the shortening of interest free periods.

Michelle Slade, personal finance analyst at Moneyfacts.co.uk, said: ‘Battling with rising bad debts, Bank of England rate increase and a huge loss in revenue from the capping of default fees, credit card providers have been forced to look for other ways to maintain their income stream.’

A careful look into the small print of terms and conditions appearing in new credit card contracts is uncovering increasing cash withdrawal fees, foreign usage charges, and requirements to make purchases as part of zero per cent balance transfer deals.

Some new conditions are so unusual, and unfair, that many customers will get hit with fees before fully understanding what the small print means.  For example, to qualify for the Lloyd bank’s Gold or Platinum MasterCard with nine months zero per cent interest, customers must spend £100 on their card in the first 90 days.

Moneyfacts.co.uk looked at the Lloyd’s deal and found that because the balance transfer is repaid first, the £100 purchases are immediately subject to interest and the cardholder loses all benefits of the interest-free balance transfer deal.

Ms Slade said: ‘With fees and rates increasing and providers becoming more ‘creative’ with their terms and conditions, it is more and more important for consumers to fully understand any credit card deal before signing up.’