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A rise in costs for users of any financial service usually results in public outcry, why is it then that so many of those same consumers allow penalty fees and charges to accrue on their credit cards, when the problem could so easily be avoided?

The financial groups Defaqto and MoneyExpert have released a report in which the startling figure that one in five consumers have had to pay just such a charge, and while credit cards were the worst offender, a number of different personal finance services also incurred unnecessary charges. These services included charges for simple personal finance errors such as allowing an overdraft to go over the agreed bank limit, or investing in an inflexible mortgage and then paying off the debt early. In both cases either better preparation beforehand with regards to choosing the right provider (such as using an online personal finance database like Moneynet’s credit cards, or http://www.fool.com) or taking advantage of financial options now readily available would have presented more flexible options which would not have imposed the penalties.

To take an example, credit cards allow greater control over your personal cash flow - you can pay now for a product or service even if the funds you use will not be available to you until the following month, at which point you pay off the credit card. Credit cards also have valuable incentives for their use with larger purchases, featuring, as the majority do, insurance options and traceability. However when you are making smaller purchases, say clothing or household products, then the use of a credit card may not be the best use of your money: searching for a suitable personal loan would most likely result in better short-term rates and the avoidance of penalties such as those imposed on the one in five people surveyed by Defaqto and MoneyExpert.

With the survey also producing the result that one in twenty consumers faced charges in excess of £100 it would seem that this problem is more than a trifle for a large portion of the UK population and that while there are a great number of personal finance options available out there, there are very often not used to the advantage of the consumer as they could so easily be with a little research.

Disclaimer
All information contained in this article is for general information purpose only and should not be construed as advice under the financial Services act 1986. You are strongly advised to take appropriate professional and legal advice before entering into any binding contracts.

About the Author:

Michael Hanna is a keen writer, and internet marketer living in Scotland:



Contact details:

E-mail: samqam@googlemail.com

Phone: 0131 561 2251

Michael’s Website: Taxi Belfast

With debt at an all time high, many of us will be looking to either transfer our current credit card debt or apply for a new credit card with more benefits or lower interest rate. However, with a plethora of card offers out there, deciding which card, if any, is best for you can seem a little daunting

What follows are some useful tips and advice that hopefully will help your decision making a little easier and clearer.

Loyalty/bonus cards

As people’s circumstances vary so do the credit card deals on offer. If you intend to clear your bill each month, the interest rate on your card becomes irrelevant as you won’t have to pay it. Therefore you should consider going for a card that offers some form of loyalty bonus such as redeemable points, cash back or air miles.

Interest-free offers

These cards are particularly useful for those don’t clear their balance each month. Shop around for cards that offer 0% interest on balance transfers and purchases. The length of these offers tend to vary, so choose one that is appropriate to you needs i.e. whether you intend to use the card mainly for purchases or a balance transfer.

Some cards allow you up to 59 days to pay for purchases before being charged interest on them, thus giving you some breathing space to pay for your goods or/and services.

Special offers

One way to save money on your card debt is to take advantage of the many debt-transfer offers available from most banks. These offers are usually exclusive to new customers and allow you to pay off your debt from a more expensive card at a lower rate for a limited period.

Cash

Although you can withdraw cash from ATM’s with your credit card, it is best left as a last resort as, although convenient, you will pay for the privilege through a steep interest rate.

Plus points

Using the plastic to pay for expensive items such as jewellery, electrical goods or goods bought online, gives you the piece of mind of consumer protection i.e. under the Consumer Credit Act, the card company are liable (as is the seller of said goods or services) if there is a breach of contract.

This is especially handy if the goods either arrive faulty/damaged or don’t arrive at all due to the supplier, for example, going bust. If any of these scenarios were to arise, you should have the money spent redeemed to your credit card.

Charges

Most cards will levy a charge against you if you fail to pay your monthly repayment on time, with penalties usually around £20. You will also incur a charge if you go over your set credit limit. Setting up a direct debit to make your monthly payment will eliminate the possibility of being late with your monthly payment and thus avoid that nasty charge.

What card then?

Deciding what credit card to apply for really depends on your personal circumstances and requirements.

If, for example, you intend to do some serious short-term shopping, a card that offers, say six month interest free on purchases, would be more suitable.

If you know in advance you will be unable to clear the balance in the short term, then a card that offers a low rate for the lifetime of the balance, would be suitable as you will save a great deal in interest payments compared with a card that resorts to a higher rate after any offers expire.

If you are able to clear your balance each month, then going for a card that offers rewards, such as cash back on purchases, would be most prudent.

Joseph Kenny is the webmaster of the UK credit card comparison site http://www.creditcards121.com/, where you can find a selection of Free Help and Advice credit card articles. He also writes for the comparison site http://www.cardguide.co.uk which offers some best credit cards in the UK.

Don’t let them fool you. All those solicitations you receive in the mail for credit card applications are meant to reel you in and hook you. Big time. In addition, new bankruptcy laws in the US and higher monthly minimum payment requirements are in place to help stem defaults on loans and to force consumers to pay down debt quicker. All of this sounds great, but credit card companies want to keep you in debt as long as possible. Please read on for all the stimulating details.

If you have had problems in the past paying down debt, do not think for a moment that you will have it any easier in the future. Thanks to legislation introduced by Congress and signed by the president earlier in 2005, filing for bankruptcy to escape debt has become more difficult. Much more so. In addition, credit card companies have raised your monthly minimum payment levels, in some cases doubling the minimum amount you must pay. Consider this last step a side issue related to the new bankruptcy legislation; the credit card companies are not legally obligated to raise minimums but they were pressured into doing so in exchange for passage of the new bankruptcy law.

Do not even think for a moment that credit card companies want you to get out of debt.

For starters, credit card rates have been rising steadily for over two years. As the prime rate goes up, your credit card interest rate goes up. Unless, of course, you have a fixed rate and you have been paying your bills on time. However, one late payment and, uh oh, you are in big trouble.

If you are late making a payment, even just once, you will likely be hit with a one time late fee charge of $29 or $39. In addition, that “sweet rate” you negotiated last year may automatically disappear. Zero percent financing can quickly turn into an 18.9% interest rate in no time and enforced retroactively too. Even “lower rate” cards with annual percentage rates of 10%, 12%, or more, can suddenly reflect rates of 24.9%, 29%, 35%, or even higher!

This is all perfectly legal too!

Read your credit card disclosure agreement - as if anyone even bothers to do so - for all the boring details. Exceptions and rules are the name of the game; there is a trap laying wide open for you to step on.

The next area of socking it to you is an old one: annual fees. Yes, they are back; for years, credit card companies — in order to remain competitive — waived annual fees. Originally, it was one small way for them to extract some cash from you: you paid them something every year even if you paid off your card monthly.

If you are like me, the whole concept of charging someone to access credit is absurd. Companies make a mint off of high interest rates as it is; throwing another fee on top of things is both apparent and transparent! Now, annual fees are back. Oh, sure, credit card companies must notify you in writing of these changes before they are put in place, but they certainly hope you won’t cancel your account in response to the “new” fee or that you will forget the notice completely and simply pay the fee. Do they think that we are stupid? I believe so!

There are two other areas where credit card companies attempt to pull a fast one on consumers: your payment due date and payment mailing address.

Your payment due date, which may have been “static” for years, could suddenly have been moved up. This means that if you are used to paying off your Visa card on the 24th of the month, it may suddenly have been moved to the 16th the following month. Without notifying you of the change either!

The address where you send your money may have changed too. Is this a big deal? It certainly is if you mail your payments in. Let’s say that you live in New Jersey and your XYZ Bank card payment goes to a South Hackensack post office. If you mail your payment in five days before the due date, you probably allowed enough time for your payment to get to the bank. Warning: Watch out that their payment address hasn’t suddenly been moved to Ohio. Your next payment will likely end up being late.

Oh, so you pay online? Don’t think that the bank credits your money immediately either. I have seen it take five days for money to electronically leave my checking account and be wired to another bank’s account. The post office moves a live check faster than that!

A moved payment due date and a changed payment address are designed to make your payments late so that the credit card company can charge you a late fee and raise your rates.

This is perfectly legal as well. Is it ethical? Hey, we’re talking about the financial services industry. What else do you expect?

Financial institutions make money off of consumers through interest rates and fee services. Please do not think for a moment that any credit card company has your best interests at heart. They don’t; they are in business to please their shareholders. Get informed and take action when one of these “perfectly legal” practices is pulled on you. You can get fees canceled and have your credit card rate lowered if you complain; back it all up in writing in order to preserve your rights.

A savvy consumer is an informed consumer; learn what tricks credit card companies use and fight back. Annually order free credit reports from Experian, TransUnion, and Equifax to make sure that unfavorable reports from creditors have not been unfairly tagged to your record. Visit the Federal Trade Commission’s site at http://www.ftc.gov/bcp/conline/pubs/credit/freereports.htm for the best way to obtain credit reports.

Copyright 2005 — Matthew Keegan is The Article Writer who writes on a variety of topics including: advocacy, automobiles, aviation, business, Christian themes, family, news, product reviews, travel, writing, and more. Samples from his portfolio are available right online.