Credit card defaults result in losses for American Express
Financial giant American Express reported recently that an increase in credit card defaults had resulted in a 6% decline in its first quarter profits.
Officials stated that there had been a rise in the number of people failing to make repayments on their cards, and this had impacted significantly on its losses for the first quarter. However, whilst profits for the quarter did fall significantly the losses were not as bad as those that had initially been forecast.
The losses incurred by the financial giant have mainly been in the United States, and the economy and financial climate in the States at present means that losses from defaults had been expected, as many struggle to keep up with their repayments.
American Express officials have stated, however, that the losses incurred as a result of defaults in America had been counteracted by encouraging performance overseas.
The chief executive of American Express stated: “While we continue to be cautious about the US economy, we are encouraged by our performance internationally.”
In the meantime consumers within the UK continue to also battle to keep on top of their debts and financial commitments, and a recent report has shown how credit card providers have continued to hike up rates and fees on cards over recent months despite the three recent base rate cuts.
This could result in an increase in the number and level of defaults in the UK, particularly given the other living cost rises that consumers have had to factor into their budgets. The situation is likely to be made worse by the recent abolition of the ten pence tax bracket, which could see those on lower incomes even worse off.
Consumers can enjoy benefits of Abbey credit card
With the global credit crunch still taking its toll in the UK money markets, and with household finances still very strained, many consumers may be looking for a more affordable credit card deal.
The Abbey has now launched a new credit card that offers borrowers a host of money saving benefits, which could help those looking to cut back on interest and charges on their credit card spending, and could even help those looking to go abroad and use their credit card.
The new Zero card from Abbey offers six months interest free credit on both balance transfers and purchases, which could help consumers to save money on interest. Unlike many other balance transfer cards the Zero card will not charge a balance transfer fee, which could also save consumers money, as this fee is usually between 2-3 percent of the total amount being transferred.
In addition to this the card will not charge for cash advances, and will not charge foreign exchange fees, enabling borrowers to save even more money.
Officials from the bank have claimed that this is the first credit card to get rid of all of these fees at the same time. An Abbey official said: “We promised the market that we would continue to innovate and that is exactly what we’ve done.”
One industry official added: “The launch of this card is fantastic news for consumers. Not only will those looking for a short-term balance transfer deal benefit but also those who are about to embark on their summer holiday. In a world where rates and charges are increasing on credit cards its good to see a lender bucking the trend and removing some of these charges.”
Pre-paid debit card for under 18s welcomed
A new prepaid debit card for the under eighteens has been welcomed by industry officials, as it comes with a proof of age element that will enable cardholders to enjoy cashless spending without the risk of them using the cards to purchase age restricted items such as alcohol or cigarettes.
The card, called the UreLife card, was launched earlier this month, and incorporates government approved proof of age verification that will prove invaluable to retailers who do not want to run the risk of selling certain products to underage customers.
A UreLife official stated: “The UreLife card is a new, safer way to carry, manage and spend money. Under-18s will have all the benefits and freedoms of cashless spending, while the proof-of-age mechanism will restrict purchases of alcohol, cigarettes and other age-restricted products. The benefits for retailers and parents are clear to see.”
The prepaid card is available for all ages, but the age verification will prove most useful with cardholders that are under the age of eighteen.
The cards are available to five different age groups, which are 12-15-years; 16-17-years; 18-20-years; 21+ years; and 60+ years. There is a different colour code assinged to each of these age groups. The cards carry a National Proof of Age Standards Scheme (PASS) hologram.
Jeremy Beadles, chief executive of the Wine & Spirit Trade Association (WSTA), said: “Our retail members are committed to preventing the sale of alcohol to under-18s, and we welcome the UreLife card as a tool to help retailers in this work.
By carrying the PASS hologram, retailers can be confident that the UreLife Card is reliable proof of age, and by providing proof of age within a payment card, it encourages young people to carry the ID they need to prove they are old enough to access the services and goods they are entitled to.”
Credit card difficulties could impact on mortgage repayments
According to one industry official the difficulties that many consumers may now be facing in securing a more affordable deal on their credit card could eventually impact on their ability to meet other financial obligations, which in some cases could include their mortgage.
The global credit crunch has taken its toll in all finance areas, including the credit card sector, and credit card providers have become much tougher with regards to who they will lend to, what sort of deals they offer, and what sort of credit limit that will be able to consider.
Officials have warned that consumers hoping to save money on their debts by transferring to a 0% balance transfer credit card could find that their options have been severely limited unless they have excellent credit.
These cards have become very popular over recent years, enabling those with debts on high interest credit cards to transfer the debt and save on interest. However, the limited choice and increased stringency stemming from the credit crunch means that some consumers may no longer be able to consider this as an option.
One official stated: “If people can’t afford their non-priority debts anymore sometimes they’ll stop paying their mortgage as well. It’s definitely having a knock-on effect. Although people with a positive credit history may still find that the choices they can make have not been limited to a great extent.”
Other recent reports have shown that both standard and balance transfer credit cards have seen interest rates hikes over recent months despite the base rate cuts, and many 0% balance transfer deals have now stopped offering capped transfer fees, which means that consumers may have to pay far more for the privilege of transferring their balance depending on how much they intend to transfer in total.