How consumers can rid themselves of high interest credit card debt
Credit cards have been known for their extortionate rates of interest for many years, and this has become more and more noticeable because of the huge gap between the base interest rate and the average credit card interest rate. Whilst the base rate has been at a record low of just 0.5 percent for well over two years credit card rates have been soaring, taking the average rate to over 18 percent.
One recent report has suggested that some people may be better off paying off their high interest credit cards with the use of a lower interest loan. By doing this consumers will know exactly how much they are paying each month and for how long. They will also know how much interest they will be paying for the loan. With credit cards consumers could be repaying the debt for decades if they only make small repayments and could end up paying a fortune in interest.
This comes after another recent report revealed that around one third of people in the UK have admitted that their personal debt levels have increased over the past year.
One industry expert stated: “There is no need for consumers to bury their heads in the sand when it comes to their finances and by taking steps to reduce personal debt, many of these problems can be nipped in the bud early on, before they escalate out of control. Trimming down household budgets and ensuring they are paying as little as possible for all their financial products can really help to free up some cash to pay down debt, and should be the first port of call for anyone who is struggling. If you are in the fortunate position where you are able to consolidate your debt, an interest free credit card would always be a good solution. Alternatively, a personal loan could be an option if you want fixed repayments and pay down your debt over a set period of time. For those in more serious trouble, I would advise seeking help from one of the free debt advice charities who can help.”
Barclay’s to settle PPI claims
Many people that were charged Payment Protection Insurance on credit cards and loans by Barclays have filed for compensation over recent months, claiming that the insurance cover was mis-sold to them. However, due to the judicial review that took place recently many of these claims were put on hold leaving the customers waiting to find out whether they had been successful.
Whilst the rest of the banking industry is still seething from losing the legal challenge over PPI compensation one major High Street banking giant has decided to get the ball rolling by settling all claims that were filed prior to April 20th this year. Barclay’s said that it is now offering these customers a no-quibble settlement of their full premium along with an additional 8 percent by way of interest.
Many customers will be delighted to hear the news, having already waited some time for their claims to be looked into. Claims that come in now or came in after April 20th will not be automatically settled and decisions will be made on a case by case basis.
Barclay’s, along with other banking giants, had been given extra time to settle the claims for PPI because of the huge backlog that had been created as a result of the judicial review.
The Financial Services Authority had stated: “Some firms are facing a huge backlog and now a surge of new complaints, which has created a bottleneck. It is not in the interests of consumers to receive further poor handling of their complaints as a result.”
Barclay’s stated: “Barclays made a commitment to process all on-hold PPI complaints as soon as practicable. We have said before that when we get things wrong, we apologize, and work hard and work fast to put them right as quickly as possible.”
Avoid claims management firms for credit card PPI
Consumers who are planning to try and reclaim PPI payments that were made on their credit cards are being warned to steer clear of claims management companies wherever possible, as otherwise they will lose a huge chunk of any money that they get back. Many people with credit cards and loans will be considering claiming for mis-sold PPI following the recent court ruling. However, many could lose out by going through a claims management company.
A huge number of claims management firms have now come out of the woodwork to try and get business from the thousands of people that will be making claims for mis-sold PPI. Many of these firms will be successful in getting people onboard, tempting them with their no win-no fee offers. However, officials have warned that borrowers who are successful with their claims could end up paying a whopping 25 percent of the money – more in some cases – to the claims management firm.
Claiming on mis-sold PPI is something that most people will be able to do quickly and easily themselves, especially with the variety of tools and resources available online. This means that consumers could potentially end up paying hundreds of pounds to claims management firms for something that they could very easily and quickly do themselves for nothing.
An official from the consumer campaign group Which? said: ‘Anyone who thinks they may have been mis-sold PPI should complain directly to whoever sold it to them. By going to a claims management company, you’ll pay what could be a lot of money for something you can easily do yourself. If your bank rejects your complaint, always go to the ombudsman – most complaints about PPI are upheld in favour of the consumer.’
Interest rates on credit cards reach highest levels in thirteen years
It has been reported that the interest rates being charged on credit cards have increased to their highest levels in thirteen years, despite the fact that the base interest rate stands at its lowest level in more than three hundred years, having been at just 0.5 percent for well over two years.
Over the past four months alone credit card interest rates are said to have soared by up to 2 percent, which means that the average rate being charged on credit cards is now 19.1 percent. Over the past four months the rates on no fewer than eighteen cards have increased, with lenders pushing up the rates to recoup financial losses stemming from changes in regulations such as the most expensive debt on the card having to be addressed first with the repayments that borrowers make.
The PPI rules have also hit credit card providers as well as loan providers, and many will end up paying out a fortune in compensation to those that claim to have been mis-sold Payment Protection Insurance over recent years following a recent court ruling. This is something else that will cause huge financial losses for credit card firms and could see rates being pushed up even further.
One official said: ‘There has been a sharp increase in the number of providers raising the interest rates charged on their credit cards. Several of the biggest providers of credit cards, including Barclaycard, Halifax, Royal Bank of Scotland and Santander, have been party to the increases. While credit card interest rates have risen, customers are now being offered the longest ever 0% balance transfer and introductory purchase deals ever seen. Providers hope to bank on customers’ reluctance to keep switching and can claw back the lost interest during intro periods once they end.’
Tap and Go payments proving popular
It has been revealed that tap & go payments credit are becoming increasingly popular in the UK, as consumers get used to the convenience, speed, and ease that they offer. These cards have been launched as a fast and effective alternative to using cash or credit cards for small payments.
According to reports London in particular is seeing an increase in mobile payments, where a card or smart phone is tapped against a special receiver that retailers have and the money is then automatically deducted from their account. There is no need for a PIN or signature with these cards and more and more retailers are said to be keen on them because they are able to save time and cut down queues.
Many well known retailers have already installed or are due to install the special receptors that are required to for these payments to be made. Tesco, Co-op, and McDonalds are amongst the latest to announce that they will be adding the receptors. The majority of contactless cards in the UK so far have been issued by banking giant Barclays and the cards can be used for payments of £15 or less in most cases.
Jatin Patel, director of accounts at Lloyds TSB, said: “It has been a bit of a chicken and egg thing. We have not been sure about issuing cards until we know there are terminals out there for customers to use. Likewise, retailers have been unsure there are enough cards to justify their investment in fitting terminals and training staff. But the momentum has been building up.”
With regards to the first tap and go smart phones, due out this summer, an Orange official added: “This is the beginning of a revolution in how we pay for items on the High Street. It is a cultural shift as important as the launches of the credit card and cash machines.”