Showing posts with label CREDIT CARD NEWS. Show all posts
Showing posts with label CREDIT CARD NEWS. Show all posts
OUT OF THE SPOTLIGHT AND THE FEES INCREASE
“When the OFT capped card fees to a recommended £12, with the exception of a handful of card providers, most adhered to the suggested limit. However Co-operative-backed cards including those provided by Smile, Northern Rock and Yorkshire BS opted to charge an £11 fee – a great way to stand out from the crowd in a positive way when the rest of the industry was under scrutiny. But now the dust has settled its fee has now also crept up to £12, along with an increase to its cash withdrawal charges too.”
BRITS CONFUSED ABOUT HOW TO DETECT AND DEAL WITH CREDIT CARD THREATS
In National Identity Fraud Prevention Week Capital One is warning that over 42 million adults in the UK don’t know how to discover if they have been a victim of ID theft, despite almost blanket awareness of the threat.
Research from the credit card company reveals that only one in ten people know exactly what do if they suspect their ID has been stolen. Encouragingly, almost everyone surveyed (99%) was aware of the threat posed by ID theft. Nearly 25 million (41%) were worried it would happen to them. To help build on existing awareness and educate its customers, Capital One has published a comprehensive advice guide to help people prevent, spot and resolve identity theft.
Identity theft is on the increase in the UK. By obtaining somebody’s personal details a fraudster can apply for credit cards, loans and other financial products in their name. They can also obtain mobile phone contracts, driving licences or even passports. The unpaid debts subsequently accrued are then lodged in the innocent person’s name. Ultimately, this can lead to encounters with debt collectors, court actions and problems getting a mortgage or even a job.
The research, carried out by YouGov on behalf of Capital One, also revealed that despite such high awareness and levels of concern, many Brits are still not taking action to ensure the security of confidential information:
16 million people take no preventative action at all against the crime
2.5 million throw documents such as bank statements away intact
5 million leave important personal information lying around “on the kitchen table”
4.5 million regularly carry sensitive documents in their wallets and bags when outside the home
32.5 million store personal information in their homes but insecurely
14 million do not shred confidential personal documents
Professor Martin Gill, Criminologist from Perpetuity, a research consultancy associated with the University of Leicester, says: “Although these figures encouragingly show an almost universal awareness about ID theft, and a high level of concern, it is worrying that people are still being blasé about storage and disposal of confidential personal documents.
“Young people particularly seem to be showing high levels of careless behaviour with more than half (55%) of 18-24 year olds taking no action to protect themselves against the risk of ID theft. Despite the high awareness of identity theft the research also highlights a real need for increased knowledge about how to identify and resolve the problems that result from fraudulent use of someone’s identity.”
Sanjiv Yajnik, Principal Managing Director, Capital One says: “We welcome such high-profile awareness raising campaigns as the National Identity Fraud Prevention week as it is concerning how many people our research reveals have no idea how to tell if their ID had been stolen, or what to do about it if they had unfortunately become a victim. The tell-tale signs of ID theft often include unexplained items appearing on bank and credit card statements, receipt of bills and receipts of goods or services you haven’t asked for, being told you are already claiming state benefits you weren’t aware of, or being refused a financial service despite having a good credit history.
“The best advice for preventing ID theft is to take steps to protect your personal information by redirecting your mail when you move house, keeping important documents in a safe place, and safeguarding your PIN and password details at all times. Additionally, regularly getting a copy of your personal credit file from a credit reference agency will allow you to spot applications or accounts that have been set up without your knowledge.”
Over 80% of those researched said they would value advice and assistance if they had their ID stolen. Capital One can help its customers to protect themselves against the perils of ID theft, and to pick up the pieces if they fall victim. Its newly updated free ID theft service will provide a named adviser to provide to help at every stage of the resolution process if a cardholder discovers they have been a victim of ID Theft.
Research from the credit card company reveals that only one in ten people know exactly what do if they suspect their ID has been stolen. Encouragingly, almost everyone surveyed (99%) was aware of the threat posed by ID theft. Nearly 25 million (41%) were worried it would happen to them. To help build on existing awareness and educate its customers, Capital One has published a comprehensive advice guide to help people prevent, spot and resolve identity theft.
Identity theft is on the increase in the UK. By obtaining somebody’s personal details a fraudster can apply for credit cards, loans and other financial products in their name. They can also obtain mobile phone contracts, driving licences or even passports. The unpaid debts subsequently accrued are then lodged in the innocent person’s name. Ultimately, this can lead to encounters with debt collectors, court actions and problems getting a mortgage or even a job.
The research, carried out by YouGov on behalf of Capital One, also revealed that despite such high awareness and levels of concern, many Brits are still not taking action to ensure the security of confidential information:
16 million people take no preventative action at all against the crime
2.5 million throw documents such as bank statements away intact
5 million leave important personal information lying around “on the kitchen table”
4.5 million regularly carry sensitive documents in their wallets and bags when outside the home
32.5 million store personal information in their homes but insecurely
14 million do not shred confidential personal documents
Professor Martin Gill, Criminologist from Perpetuity, a research consultancy associated with the University of Leicester, says: “Although these figures encouragingly show an almost universal awareness about ID theft, and a high level of concern, it is worrying that people are still being blasé about storage and disposal of confidential personal documents.
“Young people particularly seem to be showing high levels of careless behaviour with more than half (55%) of 18-24 year olds taking no action to protect themselves against the risk of ID theft. Despite the high awareness of identity theft the research also highlights a real need for increased knowledge about how to identify and resolve the problems that result from fraudulent use of someone’s identity.”
Sanjiv Yajnik, Principal Managing Director, Capital One says: “We welcome such high-profile awareness raising campaigns as the National Identity Fraud Prevention week as it is concerning how many people our research reveals have no idea how to tell if their ID had been stolen, or what to do about it if they had unfortunately become a victim. The tell-tale signs of ID theft often include unexplained items appearing on bank and credit card statements, receipt of bills and receipts of goods or services you haven’t asked for, being told you are already claiming state benefits you weren’t aware of, or being refused a financial service despite having a good credit history.
“The best advice for preventing ID theft is to take steps to protect your personal information by redirecting your mail when you move house, keeping important documents in a safe place, and safeguarding your PIN and password details at all times. Additionally, regularly getting a copy of your personal credit file from a credit reference agency will allow you to spot applications or accounts that have been set up without your knowledge.”
Over 80% of those researched said they would value advice and assistance if they had their ID stolen. Capital One can help its customers to protect themselves against the perils of ID theft, and to pick up the pieces if they fall victim. Its newly updated free ID theft service will provide a named adviser to provide to help at every stage of the resolution process if a cardholder discovers they have been a victim of ID Theft.
NEW CREDIT CARD COMPARISON SERVICE
Consumers can now compare credit cards from around 60 providers using more than 15 different search criteria categories, thanks to a brand new comparison tool from independent online finance portal, Fair Investment Company.
Available on the website – fairinvestment.co.uk – the new tool allows consumers to search through more than 220 cards to find the one that best fits their own personal financial needs and circumstances.
Search categories within the new tool include 0% balance transfer deals and interest free purchase cards, cash back and prepay cards, charity and football club cards and deals for people with bad credit.
And the advanced search option allows consumers to narrow their search even further so that the system only displays cards that offer specific features, like reward schemes, airmiles, green credentials, or online access.
James Caldwell, director at Fair Investment Company says he thinks the new tool is going to be very popular.
“In this day and age, people have very clear ideas about what they want from their credit cards. They don’t just want a credit card,” he said.
“Most people will already have an idea in their head, and will want to find the card that fits that idea, whether it is a card that will make a charity donation every time they use it, or one that will help them to offset their impact on the environment,” continued Mr Caldwell.
“Some choose cards that support their football team, while cashback or reward schemes are the motivation for others, but with so many credit cards on the market, it is difficult to know which one is offering what they actually want.
“Our new comparison service helps the consumer to carry out a quick search that allows them to pick their own criteria and therefore get everything they want from their credit card.”
Available on the website – fairinvestment.co.uk – the new tool allows consumers to search through more than 220 cards to find the one that best fits their own personal financial needs and circumstances.
Search categories within the new tool include 0% balance transfer deals and interest free purchase cards, cash back and prepay cards, charity and football club cards and deals for people with bad credit.
And the advanced search option allows consumers to narrow their search even further so that the system only displays cards that offer specific features, like reward schemes, airmiles, green credentials, or online access.
James Caldwell, director at Fair Investment Company says he thinks the new tool is going to be very popular.
“In this day and age, people have very clear ideas about what they want from their credit cards. They don’t just want a credit card,” he said.
“Most people will already have an idea in their head, and will want to find the card that fits that idea, whether it is a card that will make a charity donation every time they use it, or one that will help them to offset their impact on the environment,” continued Mr Caldwell.
“Some choose cards that support their football team, while cashback or reward schemes are the motivation for others, but with so many credit cards on the market, it is difficult to know which one is offering what they actually want.
“Our new comparison service helps the consumer to carry out a quick search that allows them to pick their own criteria and therefore get everything they want from their credit card.”
CALLS FOR POSITIVE ORDER OF PAYMENTS FOR CREDIT CARD CUSTOMERS
Following MoneyExpert.com’s announcement that three-quarters of credit cards pay off the cheapest debt first, Nationwide Building Society calls for a positive order of payments to be introduced on all credit cards.
Research from the Society reveals that seven out of ten (69%) of those questioned do not know the correct order in which their repayments are allocated to their account. However, two-thirds (66%) of credit card holders think it is important to find a credit card provider that allocates their repayments to the most expensive debt first. On average people stay with their credit card provider for six years – even if the proposition is poor – suggesting that providers are taking advantage of their customers’ apathy. Nationwide has calculated that apathy about order of payments alone costs consumers £500 million each year.
Nationwide is the only card provider to operate a positive order of payments, which means the most expensive debt is paid off first – unlike its competitors who choose to leave items with high interest, such as cash advances, to continue to accrue interest and be cleared last.
The Department of Trade and Industry recently announced that, from 1 October 2008, all credit card providers will have to draw attention to the order of payments they use. While this is a step in the right direction, Nationwide believes it does not go far enough as order of payments is not well understood by consumers, and is adverse to their best interests. Nationwide, therefore, calls on the industry to make changes now and treat their credit card customers fairly by adopting a positive approach to their order of payments.
Jeremy Wood, divisional director at Nationwide, says: “Nationwide has long-campaigned for a positive order of payments for all credit card customers. Many credit card providers use low introductory rates to lure people into opening an account. These offers can look very appealing, but when you scratch beneath the surface you discover that credit card holders often don’t receive the full benefit of these low rates. Most providers apply repayments to the cheapest debt first making it more expensive for consumers and more profitable for the credit card companies.
“Something needs to change as it’s unacceptable that over two-thirds (69%) of credit card holders do not know how their payments are allocated.”
Research from the Society reveals that seven out of ten (69%) of those questioned do not know the correct order in which their repayments are allocated to their account. However, two-thirds (66%) of credit card holders think it is important to find a credit card provider that allocates their repayments to the most expensive debt first. On average people stay with their credit card provider for six years – even if the proposition is poor – suggesting that providers are taking advantage of their customers’ apathy. Nationwide has calculated that apathy about order of payments alone costs consumers £500 million each year.
Nationwide is the only card provider to operate a positive order of payments, which means the most expensive debt is paid off first – unlike its competitors who choose to leave items with high interest, such as cash advances, to continue to accrue interest and be cleared last.
The Department of Trade and Industry recently announced that, from 1 October 2008, all credit card providers will have to draw attention to the order of payments they use. While this is a step in the right direction, Nationwide believes it does not go far enough as order of payments is not well understood by consumers, and is adverse to their best interests. Nationwide, therefore, calls on the industry to make changes now and treat their credit card customers fairly by adopting a positive approach to their order of payments.
Jeremy Wood, divisional director at Nationwide, says: “Nationwide has long-campaigned for a positive order of payments for all credit card customers. Many credit card providers use low introductory rates to lure people into opening an account. These offers can look very appealing, but when you scratch beneath the surface you discover that credit card holders often don’t receive the full benefit of these low rates. Most providers apply repayments to the cheapest debt first making it more expensive for consumers and more profitable for the credit card companies.
“Something needs to change as it’s unacceptable that over two-thirds (69%) of credit card holders do not know how their payments are allocated.”
MOST CREDIT CARD PROVIDERS PAYOFF CHEAPEST DEBT FIRST
More than three quarters of credit cards are cashing in on “order of payments” rules which allow them to clear cheap debt first and sting customers for higher interest rates, new research from MoneyExpert.com shows. Customers using plastic to borrow cash are the worst hit.
Credit card providers charge different interest rates for different forms of borrowing – cash advances, balance transfers and purchases – and their rules mean payments from customers go towards the cheapest first.
The independent financial comparison website says that 76 per cent of credit cards clear debts on cash withdrawals last, meaning that customers will be left with the most expensive debts on their bills the longest. Average interest rates on cash withdrawals are 23.96 per cent.
And over 80 per cent of cards have purchases and cash withdrawals, the two most expensive forms of spending on a credit card, as the last two items to be cleared.
MoneyExpert.com urges customers to find out how their credit card company’s order of payments and play their cards right. Most cards agree to pay off any fees on late payments incurred first, but the order in which purchases, balance transfers and cash withdrawals are paid off varies.
Most cards’ order of payments is to pay fees, balance transfers, purchases and finally cash advances, according to MoneyExpert.com.
The website says this means typically customers will have high balances on their cards on cheap credit but will pay this first with the result that more expensive borrowing sits on their account building interest until their balance transfers are repaid.
Sean Gardner, Chief Executive of MoneyExpert.com, said: “If you’re unaware of the order of payments on your card, it’s definitely worth checking. Particularly if you’re keen to buy something but have already used your card for a hefty balance transfer.
“Under those circumstances your purchase could sit on your account for over a year while you pay off your balance transfer, incurring interest of at least 20 per cent. A £500 purchase can end up costing you £600 – or more.
“As with all credit card deals you need to check that the card you’re using is suited to your requirements. If you do want to use your card for cash withdrawals or purchases there are some cards that’ll help you pay those off first to help you avoid prolonging the interest incurred. But those are few and far between.”
Credit card providers charge different interest rates for different forms of borrowing – cash advances, balance transfers and purchases – and their rules mean payments from customers go towards the cheapest first.
The independent financial comparison website says that 76 per cent of credit cards clear debts on cash withdrawals last, meaning that customers will be left with the most expensive debts on their bills the longest. Average interest rates on cash withdrawals are 23.96 per cent.
And over 80 per cent of cards have purchases and cash withdrawals, the two most expensive forms of spending on a credit card, as the last two items to be cleared.
MoneyExpert.com urges customers to find out how their credit card company’s order of payments and play their cards right. Most cards agree to pay off any fees on late payments incurred first, but the order in which purchases, balance transfers and cash withdrawals are paid off varies.
Most cards’ order of payments is to pay fees, balance transfers, purchases and finally cash advances, according to MoneyExpert.com.
The website says this means typically customers will have high balances on their cards on cheap credit but will pay this first with the result that more expensive borrowing sits on their account building interest until their balance transfers are repaid.
Sean Gardner, Chief Executive of MoneyExpert.com, said: “If you’re unaware of the order of payments on your card, it’s definitely worth checking. Particularly if you’re keen to buy something but have already used your card for a hefty balance transfer.
“Under those circumstances your purchase could sit on your account for over a year while you pay off your balance transfer, incurring interest of at least 20 per cent. A £500 purchase can end up costing you £600 – or more.
“As with all credit card deals you need to check that the card you’re using is suited to your requirements. If you do want to use your card for cash withdrawals or purchases there are some cards that’ll help you pay those off first to help you avoid prolonging the interest incurred. But those are few and far between.”
PAYMENT ADVICE TO AVOID BEING CAUGHT WITH POSTAL STRIKE
APACS, the UK payments association, is advising all UK consumers to be mindful of the postal strikes over the next week as important post could be delayed that could have a knock on affect on finances.
Any customer concerned that an important bill or invoice has been delayed should check with their supplier about timescales: it might be possible to do this online or by looking at your last bill. Suppliers usually offer customers a number of payment options that can usually be found on the back of their bill along with their timescales for receiving payments. Options might include paying by card over the phone or online at their website. Alternatively, if you bank online or on the phone, you might be able to make a one-off payment or, decide to set up a regular direct debit. Anyone who is due to pay a bill by cheque in the post during the strike should check they are not going to miss a payment deadline and be penalised as a result.
It is always a good idea for customers to check their bank and credit card statements regularly.
Sandra Quinn, director of communications at APACS, says: “We all tend to know what time of the month to expect our credit card bill so although your bill may not arrive in the next few days, you shouldn’t assume that payment isn’t due within the normal timescale. Your credit card company will be happy to discuss with you suitable payment options which will be unaffected by the postal strikes, such as phone or online payments.”
“The postal strike serves as an effective reminder of the benefit of direct debits. By setting up a direct debit, to preferably pay off, or at the very least, make the minimum repayment every month you can ensure you never pay a late payment fee. Currently direct debits are used for 58% of all personal and household bills. They save time and effort and regardless of any external factors you can be confident your bills will be paid on time without any hassle. ”
Top tips for paying bills:
1. Keep a note of when your credit card statements are due or other regular bills. If you think a bill may be due you should check with your supplier.
2. If you have already sent a cheque to pay your credit card bill and are concerned about it getting there in time, speak to your credit card company.
3. If your bill is due during the period of the strike, look at other payment options:
pay online – if you bank online or by phone you can set up a transfer or you can log onto your credit card company’s site and pay by debit card.
pay by cash or cheque at your bank or local post office
4.Consider setting up a direct debit to pay at least the minimum payment on your credit card bill. This can be done simply over the telephone.
Any customer concerned that an important bill or invoice has been delayed should check with their supplier about timescales: it might be possible to do this online or by looking at your last bill. Suppliers usually offer customers a number of payment options that can usually be found on the back of their bill along with their timescales for receiving payments. Options might include paying by card over the phone or online at their website. Alternatively, if you bank online or on the phone, you might be able to make a one-off payment or, decide to set up a regular direct debit. Anyone who is due to pay a bill by cheque in the post during the strike should check they are not going to miss a payment deadline and be penalised as a result.
It is always a good idea for customers to check their bank and credit card statements regularly.
Sandra Quinn, director of communications at APACS, says: “We all tend to know what time of the month to expect our credit card bill so although your bill may not arrive in the next few days, you shouldn’t assume that payment isn’t due within the normal timescale. Your credit card company will be happy to discuss with you suitable payment options which will be unaffected by the postal strikes, such as phone or online payments.”
“The postal strike serves as an effective reminder of the benefit of direct debits. By setting up a direct debit, to preferably pay off, or at the very least, make the minimum repayment every month you can ensure you never pay a late payment fee. Currently direct debits are used for 58% of all personal and household bills. They save time and effort and regardless of any external factors you can be confident your bills will be paid on time without any hassle. ”
Top tips for paying bills:
1. Keep a note of when your credit card statements are due or other regular bills. If you think a bill may be due you should check with your supplier.
2. If you have already sent a cheque to pay your credit card bill and are concerned about it getting there in time, speak to your credit card company.
3. If your bill is due during the period of the strike, look at other payment options:
pay online – if you bank online or by phone you can set up a transfer or you can log onto your credit card company’s site and pay by debit card.
pay by cash or cheque at your bank or local post office
4.Consider setting up a direct debit to pay at least the minimum payment on your credit card bill. This can be done simply over the telephone.
SECTION 75 APPEAL OF CONSUMER CREDIT ACT 1974
Mike Naylor, personal finance expert at uSwitch.com, comments on three major credit card companies appealing to the House of Lords yesterday to clarify if Section 75 of the Consumer Credit Act 1974 (S.75) applies to credit card purchases made overseas.
Background
Section 75 of the Consumer Credit Act 1974 is a valuable piece of legislation that has been in existence for more than 30 years. It protects consumers that make credit card purchases in the UK and, through a series of recent court battles; it now also covers overseas purchases of between £100 and £30,000. The appeal will once again clarify if foreign transactions are covered by this section of the Act. The protection consumers currently receive covers issues such as a company going bust, providing faulty goods or failure to send goods back to the UK. S.75 makes card companies jointly liable with retailers against breach of contract or misrepresentation. This has long been a matter that credit card suppliers have been unhappy with.
“Given UK consumers spent £16.4 billion abroad last year on credit and debit card transactions, the protection currently offered by S.75 on credit cards is invaluable. The vast majority of providers already impose foreign exchange rate loading of around 2.65% or 2.75% for consumers that use their credit card abroad which by far exceeds the costs incurred by the provider. This has made the process expensive whilst ensuring providers recoup any losses they suffer from the few claims that are made. With consumers already paying this premium to use their credit card overseas, arguably they are indirectly funding the extra protection offered.
“In the last month alone, a number of credit card suppliers have increased fees. For example LV= introduced a 3% foreign exchange rate loading fee, ending one of the cards best-selling points as they previously charged no fee in the EU. In addition, HBOS (Halifax, Intelligent Finance and Bank of Scotland) has made a slightly more subtle change by increasing their exchange rate loading fees from 2.75% to 2.95%.”
Naylor concludes: “We would like to see credit card companies focus their energies on educating consumers about the benefits of the legislation rather than fighting to scrap it. The use of credit cards abroad is already a lucrative part of their business and this is just a further incentive for consumers to use their cards for purchases overseas.”
Background
Section 75 of the Consumer Credit Act 1974 is a valuable piece of legislation that has been in existence for more than 30 years. It protects consumers that make credit card purchases in the UK and, through a series of recent court battles; it now also covers overseas purchases of between £100 and £30,000. The appeal will once again clarify if foreign transactions are covered by this section of the Act. The protection consumers currently receive covers issues such as a company going bust, providing faulty goods or failure to send goods back to the UK. S.75 makes card companies jointly liable with retailers against breach of contract or misrepresentation. This has long been a matter that credit card suppliers have been unhappy with.
“Given UK consumers spent £16.4 billion abroad last year on credit and debit card transactions, the protection currently offered by S.75 on credit cards is invaluable. The vast majority of providers already impose foreign exchange rate loading of around 2.65% or 2.75% for consumers that use their credit card abroad which by far exceeds the costs incurred by the provider. This has made the process expensive whilst ensuring providers recoup any losses they suffer from the few claims that are made. With consumers already paying this premium to use their credit card overseas, arguably they are indirectly funding the extra protection offered.
“In the last month alone, a number of credit card suppliers have increased fees. For example LV= introduced a 3% foreign exchange rate loading fee, ending one of the cards best-selling points as they previously charged no fee in the EU. In addition, HBOS (Halifax, Intelligent Finance and Bank of Scotland) has made a slightly more subtle change by increasing their exchange rate loading fees from 2.75% to 2.95%.”
Naylor concludes: “We would like to see credit card companies focus their energies on educating consumers about the benefits of the legislation rather than fighting to scrap it. The use of credit cards abroad is already a lucrative part of their business and this is just a further incentive for consumers to use their cards for purchases overseas.”
BEWARE OF DEBT THAT CAN OTLIVE YOU
Lisa Taylor, analyst at Moneyfacts.co.uk, comments: “During the last generation, we have moved from an era where credit was hard to come by, where people saved up to make large purchases and where many more people lived within their means, to now where we see credit being used by many as an essential tool to meet day to day living and to make those more expensive purchases.
“But by relying on plastic to supplement to our income, rather than to manage our cash flow, it’s easy to see how some people can be caught in a debt cycle, facing a lifetime of debt. In August it was reported that £53.4 bn was owed on credit cards, with 74.3% incurring interest, based on an average rate of 14.9%. It is easy to see that it’s a lucrative business for the card providers, taking a slice of a £6 bn annual interest bill.
“Used wisely, credit cards can be a great budgeting tool, but it’s too easy to fall into in the trap of only paying the minimum payment each month, perhaps not realising that this debt could outlive you. The combined effect of rising interest rates and falling minimum repayments means more and more of us will be spreading debt over a much longer period, and in some months not even covering the interest bill with the minimum repayment.
“With over 60% of credit cards requiring minimum payments of less than 3% of the outstanding balance, - it seems more of an irresponsible lending issue than providing too much credit. While it is made clear on statements that repaying the minimum amount will spread the debt over a longer period, more needs to be done. Surely no one would be prepared to pay for this year’s holiday for their entire working life. It’s only too easy to borrow and by making the repayments so low, it’s more than affordable on a monthly basis.
“Borrowers need to take control of their own credit card destiny: simply by increasing the amount they pay each month, even by a small amount can knock years off your debt. But don’t make the mistake of assuming you are restricted to paying either the minimum repayment or your balance in full. A great way to stay in control is to set up a standing order at a repayment amount you can afford, changing it as and when your circumstances change.
“Don’t line the card providers’ pockets with extra interest and worse still find your credit card debt outliving you. Take control of your credit card debt and save a packet in interest charges.”
“But by relying on plastic to supplement to our income, rather than to manage our cash flow, it’s easy to see how some people can be caught in a debt cycle, facing a lifetime of debt. In August it was reported that £53.4 bn was owed on credit cards, with 74.3% incurring interest, based on an average rate of 14.9%. It is easy to see that it’s a lucrative business for the card providers, taking a slice of a £6 bn annual interest bill.
“Used wisely, credit cards can be a great budgeting tool, but it’s too easy to fall into in the trap of only paying the minimum payment each month, perhaps not realising that this debt could outlive you. The combined effect of rising interest rates and falling minimum repayments means more and more of us will be spreading debt over a much longer period, and in some months not even covering the interest bill with the minimum repayment.
“With over 60% of credit cards requiring minimum payments of less than 3% of the outstanding balance, - it seems more of an irresponsible lending issue than providing too much credit. While it is made clear on statements that repaying the minimum amount will spread the debt over a longer period, more needs to be done. Surely no one would be prepared to pay for this year’s holiday for their entire working life. It’s only too easy to borrow and by making the repayments so low, it’s more than affordable on a monthly basis.
“Borrowers need to take control of their own credit card destiny: simply by increasing the amount they pay each month, even by a small amount can knock years off your debt. But don’t make the mistake of assuming you are restricted to paying either the minimum repayment or your balance in full. A great way to stay in control is to set up a standing order at a repayment amount you can afford, changing it as and when your circumstances change.
“Don’t line the card providers’ pockets with extra interest and worse still find your credit card debt outliving you. Take control of your credit card debt and save a packet in interest charges.”
FRAUD ABROAD DRIVES UP CREDIT CARD LOSES
Total card fraud losses increased by 26 per cent in the six months to June 2007 compared with the first half of 2006, according to figures released by APACS, the UK payments association.
This increase has been driven by a 126 per cent rise in fraud on UK-issued cards being used overseas. In contrast, domestic card fraud continues to fall thanks to chip and PIN, with losses at UK retailers down 11 per cent and losses at UK cash machines down 57 per cent.
The introduction of chip and PIN has made it more difficult for fraudsters to commit card fraud in the UK. Criminals are now being forced to commit card fraud overseas on UK-issued cards. They copy the magnetic stripe data on our cards to create fake cards that they use in countries that have yet to upgrade to chip and PIN. However, as more countries rollout this secure technology the opportunities for criminals to use fake magnetic stripe cards overseas will decrease. To help achieve this end, the European banking industry has set itself the target of completing its chip card rollout by 2010.
Losses from online, phone and mail order shopping fraud have continued to increase year-on-year. However, this increase has to be seen in the context of increasing numbers of people shopping online and ever-growing numbers of online transactions. According to APACS figures, the number of adults shopping online has increased by 157 per cent in the last five years, from 11 million in 2001 to over 28 million last year. By comparison, online, phone and mail order fraud has grown by 122 per cent during the same time period. The fraud to turnover ratio on online card transactions has also decreased – down from 0.7 per cent in 2004 to 0.5 per cent in 2006.
Online banking fraud losses fell by 67 per cent from £22.4m in the first six months of 2006 to just £7.5m in the same period this year. This decrease occurred because online banks have successfully implemented a range of measures to detect and prevent fraud, coupled with the fact that there was an unusually high level of online banking fraud in the first few months of 2006.
Sandra Quinn, director of communications at APACS, says: “These figures show how the fraudsters have changed tack. A couple of years ago they were mainly stealing cards and card details for use in UK shops and cash machines, but today, because of chip and PIN, they have been driven overseas - using fake magnetic stripe cards specifically in countries which have yet to upgrade to chip and PIN. During the interim we will continue to use fraud intelligence systems to tackle overseas losses and encourage those countries that are lagging behind on chip and PIN to follow our lead.
“The banking industry also continues to work with law enforcement, card accepting businesses, the Home Office and organisations such as Crimestoppers to help deter and prevent the fraudsters. Consumers should also play their part - for example, cardholders should be aware that the majority of online fraud involves a criminal obtaining card details in the real world that are then used to shop fraudulently online. So we continue to urge people to register with the secure online payment systems - MasterCard SecureCode and Verified by Visa - which help prevent cards being used fraudulently over the internet.”
To further raise awareness around card security APACS, last month, published a consumer advice guide - Protect your PIN - to remind cardholders of the need to keep their PIN and card details safe and secure at all times. Educating consumers about the importance of keeping PINs safe and secure can play an important part in tackling fraud. This, together with a range of fraud prevention material and information for consumers and retailers alike, can be found at the banking industry’s fraud prevention website cardwatch.org.uk.
This increase has been driven by a 126 per cent rise in fraud on UK-issued cards being used overseas. In contrast, domestic card fraud continues to fall thanks to chip and PIN, with losses at UK retailers down 11 per cent and losses at UK cash machines down 57 per cent.
The introduction of chip and PIN has made it more difficult for fraudsters to commit card fraud in the UK. Criminals are now being forced to commit card fraud overseas on UK-issued cards. They copy the magnetic stripe data on our cards to create fake cards that they use in countries that have yet to upgrade to chip and PIN. However, as more countries rollout this secure technology the opportunities for criminals to use fake magnetic stripe cards overseas will decrease. To help achieve this end, the European banking industry has set itself the target of completing its chip card rollout by 2010.
Losses from online, phone and mail order shopping fraud have continued to increase year-on-year. However, this increase has to be seen in the context of increasing numbers of people shopping online and ever-growing numbers of online transactions. According to APACS figures, the number of adults shopping online has increased by 157 per cent in the last five years, from 11 million in 2001 to over 28 million last year. By comparison, online, phone and mail order fraud has grown by 122 per cent during the same time period. The fraud to turnover ratio on online card transactions has also decreased – down from 0.7 per cent in 2004 to 0.5 per cent in 2006.
Online banking fraud losses fell by 67 per cent from £22.4m in the first six months of 2006 to just £7.5m in the same period this year. This decrease occurred because online banks have successfully implemented a range of measures to detect and prevent fraud, coupled with the fact that there was an unusually high level of online banking fraud in the first few months of 2006.
Sandra Quinn, director of communications at APACS, says: “These figures show how the fraudsters have changed tack. A couple of years ago they were mainly stealing cards and card details for use in UK shops and cash machines, but today, because of chip and PIN, they have been driven overseas - using fake magnetic stripe cards specifically in countries which have yet to upgrade to chip and PIN. During the interim we will continue to use fraud intelligence systems to tackle overseas losses and encourage those countries that are lagging behind on chip and PIN to follow our lead.
“The banking industry also continues to work with law enforcement, card accepting businesses, the Home Office and organisations such as Crimestoppers to help deter and prevent the fraudsters. Consumers should also play their part - for example, cardholders should be aware that the majority of online fraud involves a criminal obtaining card details in the real world that are then used to shop fraudulently online. So we continue to urge people to register with the secure online payment systems - MasterCard SecureCode and Verified by Visa - which help prevent cards being used fraudulently over the internet.”
To further raise awareness around card security APACS, last month, published a consumer advice guide - Protect your PIN - to remind cardholders of the need to keep their PIN and card details safe and secure at all times. Educating consumers about the importance of keeping PINs safe and secure can play an important part in tackling fraud. This, together with a range of fraud prevention material and information for consumers and retailers alike, can be found at the banking industry’s fraud prevention website cardwatch.org.uk.
LORDS TO DECIDE ON CREDIT CARD PROTECTION
Credit card issuers will today appear at the House of Lords to appeal the Court of Appeal judgment that section 75 of the Consumer Credit Act 1974 applies to overseas transactions.
The Court of Appeal judgment in March last year confirmed the OFT's view that credit card issuers are jointly liable with overseas suppliers if the consumer has a valid claim for misrepresentation or breach of contract by the supplier where the price of the purchase is above £100 but no more than £30,000.
Consumers are, therefore, currently able to make a claim against the credit card issuer as well as or instead of the overseas supplier.
The House of Lords judgment will clarify whether section 75 covers foreign transactions including where:
a consumer uses a UK credit card to buy goods while abroad
a consumer orders goods from a foreign supplier while abroad for delivery into the UK
a consumer in the UK buys goods which are delivered to a UK address from overseas by telephone, mail order or over the internet
there is face-to-face pre-contract dealings with a foreign supplier temporarily in the UK, or with a UK agent of a foreign supplier, but the contract is not completed in the UK.
The hearing is expected to last two days and a judgment will be handed down in due course.
The Court of Appeal judgment in March last year confirmed the OFT's view that credit card issuers are jointly liable with overseas suppliers if the consumer has a valid claim for misrepresentation or breach of contract by the supplier where the price of the purchase is above £100 but no more than £30,000.
Consumers are, therefore, currently able to make a claim against the credit card issuer as well as or instead of the overseas supplier.
The House of Lords judgment will clarify whether section 75 covers foreign transactions including where:
a consumer uses a UK credit card to buy goods while abroad
a consumer orders goods from a foreign supplier while abroad for delivery into the UK
a consumer in the UK buys goods which are delivered to a UK address from overseas by telephone, mail order or over the internet
there is face-to-face pre-contract dealings with a foreign supplier temporarily in the UK, or with a UK agent of a foreign supplier, but the contract is not completed in the UK.
The hearing is expected to last two days and a judgment will be handed down in due course.
THE NEEDLESS WASTE OF CASH WITHDRAWALS
Britons are taking out £8.3 billion cash on their credit cards each year and paying a huge premium for the privilege.
Analysis from price comparison site moneysupermarket.com shows one £20 cash withdrawal per month can result in cardholders paying £65 in fees and interest, or 27 per cent, over the year – and that's even after paying off the balance at the end of each month. Between the nation's leading credit card providers, the average amount someone will pay on those 12 withdrawals will be £36, or 15 per cent.
Rob Kenley, head of credit cards at moneysupermarket.com, said: "People should think very carefully before using their credit card to take out cash. At a cost of up to 27 pence for every pound taken out, this is an exceptionally expensive way to spend. The real killer is the cash withdrawal fee of between £2.50 and £5 on most cards, other than Egg Money which does not charge any cash withdrawal fees.
“Wherever possible you should only withdraw cash from your current account, but we realise sometimes people face unexpected emergencies. If you run out of money but still need to make purchases, then using a credit card with 0 per cent on purchases is much more cost effective.”
Analysis from price comparison site moneysupermarket.com shows one £20 cash withdrawal per month can result in cardholders paying £65 in fees and interest, or 27 per cent, over the year – and that's even after paying off the balance at the end of each month. Between the nation's leading credit card providers, the average amount someone will pay on those 12 withdrawals will be £36, or 15 per cent.
Rob Kenley, head of credit cards at moneysupermarket.com, said: "People should think very carefully before using their credit card to take out cash. At a cost of up to 27 pence for every pound taken out, this is an exceptionally expensive way to spend. The real killer is the cash withdrawal fee of between £2.50 and £5 on most cards, other than Egg Money which does not charge any cash withdrawal fees.
“Wherever possible you should only withdraw cash from your current account, but we realise sometimes people face unexpected emergencies. If you run out of money but still need to make purchases, then using a credit card with 0 per cent on purchases is much more cost effective.”
ADVISE GUIDES TO HELP YOUNG PEOPLE CHOOSE THE RIGHT PLASTIC CARD
APACS, the UK payments association, has launched two new advice guides, offering practical advice on choosing a plastic card for a teenager or young adult.
One of the guides, 'Choosing cards - a guide for the under 18s', is aimed at young people, and the other, 'Using cards - a guide for parents', is for their parents. These form part of a series of consumer advice guides produced by APACS aimed at simplifying personal finance.
Statistics gathered by APACS reveal that 86 per cent of 18 to 24 year olds hold some kind of plastic card. These guides highlight and explain the range of options available to young people and identify the advantages of choosing a certain type of card over another - as different cards will be suitable for different people. They outline what young people can buy, and offer a series of top tips on how to keep safe from card fraud.
APACS statistics also show that:
to 24 year olds who have a debit card make an average of 69 payments on the high street each year with their card, or almost six a month.
Only 37 per cent of 18 to 24 year olds hold a credit or charge card, compared to 66 per cent of all adults.
Credit/charge card holders aged between 18 and 24 hold on average 1.72 credit/charge cards, compared to 2.3 for all adults.
Sandra Quinn, director of communications at APACS, says: "Young people are spending ever-increasing amounts of money and it is therefore vital that they make a considered decision before choosing which product they use. The guide for under 18s provides straightforward advice for young people thinking about getting their first plastic card.
"We're also releasing a guide for parents, as parents are in the best position to educate young people on how to use plastic cards. It is important that they are aware of the different options available, and how to keep their children safe from fraud.
"Being able to manage their personal finances is one of the most important life skills a young person can acquire, and these guides give both young people and their parents a useful introduction to some of the issues that they will face."
One of the guides, 'Choosing cards - a guide for the under 18s', is aimed at young people, and the other, 'Using cards - a guide for parents', is for their parents. These form part of a series of consumer advice guides produced by APACS aimed at simplifying personal finance.
Statistics gathered by APACS reveal that 86 per cent of 18 to 24 year olds hold some kind of plastic card. These guides highlight and explain the range of options available to young people and identify the advantages of choosing a certain type of card over another - as different cards will be suitable for different people. They outline what young people can buy, and offer a series of top tips on how to keep safe from card fraud.
APACS statistics also show that:
to 24 year olds who have a debit card make an average of 69 payments on the high street each year with their card, or almost six a month.
Only 37 per cent of 18 to 24 year olds hold a credit or charge card, compared to 66 per cent of all adults.
Credit/charge card holders aged between 18 and 24 hold on average 1.72 credit/charge cards, compared to 2.3 for all adults.
Sandra Quinn, director of communications at APACS, says: "Young people are spending ever-increasing amounts of money and it is therefore vital that they make a considered decision before choosing which product they use. The guide for under 18s provides straightforward advice for young people thinking about getting their first plastic card.
"We're also releasing a guide for parents, as parents are in the best position to educate young people on how to use plastic cards. It is important that they are aware of the different options available, and how to keep their children safe from fraud.
"Being able to manage their personal finances is one of the most important life skills a young person can acquire, and these guides give both young people and their parents a useful introduction to some of the issues that they will face."
CREDIT CARD COMPARISON SERVICE
Consumers can now compare credit cards from around 60 providers using more than 15 different search criteria categories, thanks to a brand new comparison tool from independent online finance portal, Fair Investment Company.
Available on the website – fairinvestment.co.uk – the new tool allows consumers to search through more than 220 cards to find the one that best fits their own personal financial needs and circumstances.
Search categories within the new tool include 0% balance transfer deals and interest free purchase cards, cash back and prepay cards, charity and football club cards and deals for people with bad credit.
And the advanced search option allows consumers to narrow their search even further so that the system only displays cards that offer specific features, like reward schemes, airmiles, green credentials, or online access.
James Caldwell, director at Fair Investment Company says he thinks the new tool is going to be very popular.
“In this day and age, people have very clear ideas about what they want from their credit cards. They don’t just want a credit card,” he said.
“Most people will already have an idea in their head, and will want to find the card that fits that idea, whether it is a card that will make a charity donation every time they use it, or one that will help them to offset their impact on the environment,” continued Mr Caldwell.
“Some choose cards that support their football team, while cashback or reward schemes are the motivation for others, but with so many credit cards on the market, it is difficult to know which one is offering what they actually want.
“Our new comparison service helps the consumer to carry out a quick search that allows them to pick their own criteria and therefore get everything they want from their credit card.”
Available on the website – fairinvestment.co.uk – the new tool allows consumers to search through more than 220 cards to find the one that best fits their own personal financial needs and circumstances.
Search categories within the new tool include 0% balance transfer deals and interest free purchase cards, cash back and prepay cards, charity and football club cards and deals for people with bad credit.
And the advanced search option allows consumers to narrow their search even further so that the system only displays cards that offer specific features, like reward schemes, airmiles, green credentials, or online access.
James Caldwell, director at Fair Investment Company says he thinks the new tool is going to be very popular.
“In this day and age, people have very clear ideas about what they want from their credit cards. They don’t just want a credit card,” he said.
“Most people will already have an idea in their head, and will want to find the card that fits that idea, whether it is a card that will make a charity donation every time they use it, or one that will help them to offset their impact on the environment,” continued Mr Caldwell.
“Some choose cards that support their football team, while cashback or reward schemes are the motivation for others, but with so many credit cards on the market, it is difficult to know which one is offering what they actually want.
“Our new comparison service helps the consumer to carry out a quick search that allows them to pick their own criteria and therefore get everything they want from their credit card.”
NEW CREDIT CARD BALANCE TRANSFER OFFERS FROM BARCLAY CARD AND CAPITAL ONE
Commenting on two new credit card balance transfer offers, Stuart Glendinning, managing director of moneysupermarket.com, said: “Barclaycard's launch of a credit card offering 0 per cent on balance transfers until July 1, 2008 follows closely behind a similar offering from Capital One. When people consider there is also the Virgin deal offering 0 per cent on balance transfers for 13 months, we are looking at the most competitive range of deals available since the introduction of balance transfer fees nearly three years ago.
“There has been the odd, isolated card offering longer term 0 per cent balance transfer deals – Capital One offered 0 per cent for 18 months last year – but the combination of so many providers offering such long terms is new and indicates that card providers are competing vigorously for business.
“The balance transfer fee was first introduced by Barclaycard in August 2004 and has since become the industry norm. The primary purpose, other than improving profit margins, was to eradicate the ‘rate tart’. So far this has proved an effective way to stop people churning their debt from one 0 per cent balance transfer deal to another by making people have to pay for the privilege. However, the current batch of new cards shows that offering 0 per cent on balance transfers is still a key way to attract new customers. Providers are pulling out all the stops to hit their sales targets.
“Indeed, people can still save large amounts by transferring their balances to the right card – as much as £300 a year in interest payments could be up for grabs, even taking the balance transfer fee into account.”
“There has been the odd, isolated card offering longer term 0 per cent balance transfer deals – Capital One offered 0 per cent for 18 months last year – but the combination of so many providers offering such long terms is new and indicates that card providers are competing vigorously for business.
“The balance transfer fee was first introduced by Barclaycard in August 2004 and has since become the industry norm. The primary purpose, other than improving profit margins, was to eradicate the ‘rate tart’. So far this has proved an effective way to stop people churning their debt from one 0 per cent balance transfer deal to another by making people have to pay for the privilege. However, the current batch of new cards shows that offering 0 per cent on balance transfers is still a key way to attract new customers. Providers are pulling out all the stops to hit their sales targets.
“Indeed, people can still save large amounts by transferring their balances to the right card – as much as £300 a year in interest payments could be up for grabs, even taking the balance transfer fee into account.”
NEW CREDIT CARD COMPARISON SERVICE
Consumers can now compare credit cards from around 60 providers using more than 15 different search criteria categories, thanks to a brand new comparison tool from independent online finance portal, Fair Investment Company.
Available on the website – fairinvestment.co.uk – the new tool allows consumers to search through more than 220 cards to find the one that best fits their own personal financial needs and circumstances.
Search categories within the new tool include 0% balance transfer deals and interest free purchase cards, cash back and prepay cards, charity and football club cards and deals for people with bad credit.
And the advanced search option allows consumers to narrow their search even further so that the system only displays cards that offer specific features, like reward schemes, airmiles, green credentials, or online access.
James Caldwell, director at Fair Investment Company says he thinks the new tool is going to be very popular.
“In this day and age, people have very clear ideas about what they want from their credit cards. They don’t just want a credit card,” he said.
“Most people will already have an idea in their head, and will want to find the card that fits that idea, whether it is a card that will make a charity donation every time they use it, or one that will help them to offset their impact on the environment,” continued Mr Caldwell.
“Some choose cards that support their football team, while cashback or reward schemes are the motivation for others, but with so many credit cards on the market, it is difficult to know which one is offering what they actually want.
“Our new comparison service helps the consumer to carry out a quick search that allows them to pick their own criteria and therefore get everything they want from their credit card.”
Available on the website – fairinvestment.co.uk – the new tool allows consumers to search through more than 220 cards to find the one that best fits their own personal financial needs and circumstances.
Search categories within the new tool include 0% balance transfer deals and interest free purchase cards, cash back and prepay cards, charity and football club cards and deals for people with bad credit.
And the advanced search option allows consumers to narrow their search even further so that the system only displays cards that offer specific features, like reward schemes, airmiles, green credentials, or online access.
James Caldwell, director at Fair Investment Company says he thinks the new tool is going to be very popular.
“In this day and age, people have very clear ideas about what they want from their credit cards. They don’t just want a credit card,” he said.
“Most people will already have an idea in their head, and will want to find the card that fits that idea, whether it is a card that will make a charity donation every time they use it, or one that will help them to offset their impact on the environment,” continued Mr Caldwell.
“Some choose cards that support their football team, while cashback or reward schemes are the motivation for others, but with so many credit cards on the market, it is difficult to know which one is offering what they actually want.
“Our new comparison service helps the consumer to carry out a quick search that allows them to pick their own criteria and therefore get everything they want from their credit card.”
CALLS FOR POSITIVE ORDER OF PAYMENTS FOR CREDIT CARD CUSTOMERS
Following MoneyExpert.com’s announcement that three-quarters of credit cards pay off the cheapest debt first, Nationwide Building Society calls for a positive order of payments to be introduced on all credit cards.
Research from the Society reveals that seven out of ten (69%) of those questioned do not know the correct order in which their repayments are allocated to their account. However, two-thirds (66%) of credit card holders think it is important to find a credit card provider that allocates their repayments to the most expensive debt first. On average people stay with their credit card provider for six years – even if the proposition is poor – suggesting that providers are taking advantage of their customers’ apathy. Nationwide has calculated that apathy about order of payments alone costs consumers £500 million each year.
Nationwide is the only card provider to operate a positive order of payments, which means the most expensive debt is paid off first – unlike its competitors who choose to leave items with high interest, such as cash advances, to continue to accrue interest and be cleared last.
The Department of Trade and Industry recently announced that, from 1 October 2008, all credit card providers will have to draw attention to the order of payments they use. While this is a step in the right direction, Nationwide believes it does not go far enough as order of payments is not well understood by consumers, and is adverse to their best interests. Nationwide, therefore, calls on the industry to make changes now and treat their credit card customers fairly by adopting a positive approach to their order of payments.
Jeremy Wood, divisional director at Nationwide, says: “Nationwide has long-campaigned for a positive order of payments for all credit card customers. Many credit card providers use low introductory rates to lure people into opening an account. These offers can look very appealing, but when you scratch beneath the surface you discover that credit card holders often don’t receive the full benefit of these low rates. Most providers apply repayments to the cheapest debt first making it more expensive for consumers and more profitable for the credit card companies.
“Something needs to change as it’s unacceptable that over two-thirds (69%) of credit card holders do not know how their payments are allocated.”
Research from the Society reveals that seven out of ten (69%) of those questioned do not know the correct order in which their repayments are allocated to their account. However, two-thirds (66%) of credit card holders think it is important to find a credit card provider that allocates their repayments to the most expensive debt first. On average people stay with their credit card provider for six years – even if the proposition is poor – suggesting that providers are taking advantage of their customers’ apathy. Nationwide has calculated that apathy about order of payments alone costs consumers £500 million each year.
Nationwide is the only card provider to operate a positive order of payments, which means the most expensive debt is paid off first – unlike its competitors who choose to leave items with high interest, such as cash advances, to continue to accrue interest and be cleared last.
The Department of Trade and Industry recently announced that, from 1 October 2008, all credit card providers will have to draw attention to the order of payments they use. While this is a step in the right direction, Nationwide believes it does not go far enough as order of payments is not well understood by consumers, and is adverse to their best interests. Nationwide, therefore, calls on the industry to make changes now and treat their credit card customers fairly by adopting a positive approach to their order of payments.
Jeremy Wood, divisional director at Nationwide, says: “Nationwide has long-campaigned for a positive order of payments for all credit card customers. Many credit card providers use low introductory rates to lure people into opening an account. These offers can look very appealing, but when you scratch beneath the surface you discover that credit card holders often don’t receive the full benefit of these low rates. Most providers apply repayments to the cheapest debt first making it more expensive for consumers and more profitable for the credit card companies.
“Something needs to change as it’s unacceptable that over two-thirds (69%) of credit card holders do not know how their payments are allocated.”
MOST CREDIT CARD PROVIDERS PAY OFF CHEAPEST DEBT FIRST
More than three quarters of credit cards are cashing in on “order of payments” rules which allow them to clear cheap debt first and sting customers for higher interest rates, new research from MoneyExpert.com shows. Customers using plastic to borrow cash are the worst hit.
Credit card providers charge different interest rates for different forms of borrowing – cash advances, balance transfers and purchases – and their rules mean payments from customers go towards the cheapest first.
The independent financial comparison website says that 76 per cent of credit cards clear debts on cash withdrawals last, meaning that customers will be left with the most expensive debts on their bills the longest. Average interest rates on cash withdrawals are 23.96 per cent.
And over 80 per cent of cards have purchases and cash withdrawals, the two most expensive forms of spending on a credit card, as the last two items to be cleared.
MoneyExpert.com urges customers to find out how their credit card company’s order of payments and play their cards right. Most cards agree to pay off any fees on late payments incurred first, but the order in which purchases, balance transfers and cash withdrawals are paid off varies.
Most cards’ order of payments is to pay fees, balance transfers, purchases and finally cash advances, according to MoneyExpert.com.
The website says this means typically customers will have high balances on their cards on cheap credit but will pay this first with the result that more expensive borrowing sits on their account building interest until their balance transfers are repaid.
Sean Gardner, Chief Executive of MoneyExpert.com, said: “If you’re unaware of the order of payments on your card, it’s definitely worth checking. Particularly if you’re keen to buy something but have already used your card for a hefty balance transfer.
“Under those circumstances your purchase could sit on your account for over a year while you pay off your balance transfer, incurring interest of at least 20 per cent. A £500 purchase can end up costing you £600 – or more.
“As with all credit card deals you need to check that the card you’re using is suited to your requirements. If you do want to use your card for cash withdrawals or purchases there are some cards that’ll help you pay those off first to help you avoid prolonging the interest incurred. But those are few and far between.”
Credit card providers charge different interest rates for different forms of borrowing – cash advances, balance transfers and purchases – and their rules mean payments from customers go towards the cheapest first.
The independent financial comparison website says that 76 per cent of credit cards clear debts on cash withdrawals last, meaning that customers will be left with the most expensive debts on their bills the longest. Average interest rates on cash withdrawals are 23.96 per cent.
And over 80 per cent of cards have purchases and cash withdrawals, the two most expensive forms of spending on a credit card, as the last two items to be cleared.
MoneyExpert.com urges customers to find out how their credit card company’s order of payments and play their cards right. Most cards agree to pay off any fees on late payments incurred first, but the order in which purchases, balance transfers and cash withdrawals are paid off varies.
Most cards’ order of payments is to pay fees, balance transfers, purchases and finally cash advances, according to MoneyExpert.com.
The website says this means typically customers will have high balances on their cards on cheap credit but will pay this first with the result that more expensive borrowing sits on their account building interest until their balance transfers are repaid.
Sean Gardner, Chief Executive of MoneyExpert.com, said: “If you’re unaware of the order of payments on your card, it’s definitely worth checking. Particularly if you’re keen to buy something but have already used your card for a hefty balance transfer.
“Under those circumstances your purchase could sit on your account for over a year while you pay off your balance transfer, incurring interest of at least 20 per cent. A £500 purchase can end up costing you £600 – or more.
“As with all credit card deals you need to check that the card you’re using is suited to your requirements. If you do want to use your card for cash withdrawals or purchases there are some cards that’ll help you pay those off first to help you avoid prolonging the interest incurred. But those are few and far between.”
0% APR INTRODUCTORY CREDIT CARD OFFERS STILL EXISTS
The trick of profiting from introductory credit card offers and declared that there are still enough opportunities for those we are willing to take a temporary hit on credit score for a couple of extra grands a year:
"The increasingly popular strategy involves applying for a slew of credit cards that charge 0% interest on balance transfers, then parking those borrowed funds in high-yield online savings accounts, which often pay 5% or more.Then, just before the cards' introductory period expires, typically in 12 months, you pay off the loans and pocket the interest earned.
...
Competition among card issuers for new customers is so intense that companies can't afford to do away with the generous offers altogether. American Express Co., Citibank, J.P. Morgan Chase & Co. and Bank of America, for example, say they still offer no-fee, 0% balance transfers to selected customers."
I myself am a loyal practioner of the practice, and in the past 12 months alone, I maintained an average credit card balance of over $40,000 in 0% APR or low-APR balance transfer offers. That's probably the easiest $2,000 I pocketed last year.
In case you don't know where to find these offers, below are some cards you can look at. They all include introductory 0% APR balance transfer offers for 12 months or longer with credit card annual fee. I included those with capped balance transfer transaction fees since with a larger balance transfer, arbitrage profit can still be obtained under capped fee arrangements.
0% INTEREST CREDIT CARDS
Methods for Charging Interest:
Average Daily Balance: The sum of the daily outstanding balances is divided by the number of days covered in the cycle to give an average balance for that period. This amount is multiplied by a constant factor to give an interest charge.
Adjusted Balance: The balance at the end of the billing cycle is multiplied by a factor in order to give the interest charge.
Previous Balance: The reverse happens: the balance at the start of the previous billing cycle is multiplied by the interest factor in order to derive the charge.
Credit card holders should be aware that most US credit cards are quoted in terms of nominal APR compounded monthly, which is not the same as the effective annual rate (EAR). Despite the "Annual" in APR, it is not necessarily a direct reference for the interest rate paid on a stable balance over one year. The more direct reference for the one-year rate of interest is EAR. The general conversion factor for APR to EAR is EAR=(1+APR/n)^n-1, where n represents the number of compounding periods of the APR per EAR period.
Current US credit card interest rate averages
Monthly UK Debt Statistics Includes credit card rate averages
Average Daily Balance: The sum of the daily outstanding balances is divided by the number of days covered in the cycle to give an average balance for that period. This amount is multiplied by a constant factor to give an interest charge.
Adjusted Balance: The balance at the end of the billing cycle is multiplied by a factor in order to give the interest charge.
Previous Balance: The reverse happens: the balance at the start of the previous billing cycle is multiplied by the interest factor in order to derive the charge.
Credit card holders should be aware that most US credit cards are quoted in terms of nominal APR compounded monthly, which is not the same as the effective annual rate (EAR). Despite the "Annual" in APR, it is not necessarily a direct reference for the interest rate paid on a stable balance over one year. The more direct reference for the one-year rate of interest is EAR. The general conversion factor for APR to EAR is EAR=(1+APR/n)^n-1, where n represents the number of compounding periods of the APR per EAR period.
Current US credit card interest rate averages
Monthly UK Debt Statistics Includes credit card rate averages
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