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Archive for January, 2008

Banks Making Profit From 0% Deals

Wednesday, January 16th, 2008

According to a report from MoneyExpert.com, banks made more than £239 million in transfer fees from credit cards offering zero percent interest rates in Britain in the last year.

Many customers choose a zero percent interest rate credit card to help manage their finances, however many credit card companies are charging customers transfer fees of up to three percent of the balance.  If someone with a £5,000 debt is charged 3% they will then have to pay a fee of £150.  The Office of Fair Trading is considering looking into these fees.

Many consumers who want to save money on their interest payments and manage their debts have used a zero percent balance transfer deal.  Almost all credit card providers who offer zero percent balance transfers now charge a handling fee anywhere from two percent to three percent of the balance being transferred.  The balance transfer handling fee became widespread after banks and building societies were hit last year by the Office of Fair Trading on charging penalty fees, so the banks then sought another source of income, which has come to be the transfer fees on zero percent balance transfer cards.  According to the report almost 12 million people have switched credit cards over the past year with an average fee of £19.99.

Balance transfer credit cards are ideal for those who have large sums that they want to pay off and avoid paying interest on.  However, as you are searching for a credit card with a zero percent balance transfer you will want to compare the handling fees that the credit card provider will charge as some will only charge a flat rate, while other will charge a percent of the amount being transferred.

Bear in mind too how long you realistically expect to take to pay off the debt.  You may know that the 0% period only offers you a break from paying interest and that you cannot clear the outstanding sum in that time. If so, you will want to calculate how much interest you will be paying once the period is over. It may cost you less money and hassle to arrange a debt consolidation loan. Although a loan will attract interest from day one, at least you are committed to a set period to repay at a rate that won’t change.

Posted in Balance transfer, Bank charges, Borrowing, Consumer Credit, Credit Card, Debt Consolidation, Debt management, Financial news, Financial products, interest rates, UK Finance, Zero percent cards | No Comments »

Understanding The Fine Print

Thursday, January 10th, 2008

Before signing any contract or deal you are always told to read the fine print, and this is for a good reason.  Most of the important information that is almost always overlooked is mentioned in the fine print of the document.  Often this may include default terms or the eligibility of a good interest rate offer on a cheap loan or credit card.  It is estimated that as much as six million consumers fail to read the small print of their contract or transaction.

A recent study reveals that more than fifty percent of adults admitted to not reading the small print when buying financial products, mobile phones or electrical goods.  This is disturbing as often the lack of understanding of the fine print in your contract can lead to major problems or, in extreme cases, financial ruin.  Once a repayment contract on a credit deal – such as a mortgage or personal loan – has been breached, penalties and charges can snowball, putting the consumer at risk of losing their home.

One of the most important contracts where fine print must be completely understood is the credit card agreement.  All credit card companies are in the business to make a profit off their customers and with the Office of Fair Trading cracking down on unfair charges, credit card companies must then find other ways of making a profit.  Some of these ways include cash withdrawal fees, foreign usage charges; higher interest rates if the cardholder defaults as well as shorter interest-free periods.  It is important that consumers first read over the fine print of the credit card agreements before activating an account.  Often credit card holders fail to read over their agreements properly and overlook items such as handling fees for balance transfers or the high interest rates that are charged on cash withdrawals, and in some cases credit card providers are allowed to reprice a contract should the cardholder default on payments, which means they can then start charging a higher interest rate.

Posted in Bad Credit, Bank charges, Banking, Borrowing, Consumer Credit, Consumer debt, Credit Card, Credit record, Debt management, Financial products, Homeowner Loans, Homeowners, House repossession, interest rates, Missed payments, mortgages, Overdrafts, Personal debt, Personal loans, Secured loans, Spending, Store cards, Tenant loans, UK Finance, Unsecured loans | No Comments »

Read what the bank is offering before you say Yes!

Thursday, January 10th, 2008

No matter who you are, when it comes to your personal finances, so much depends on the deals that you get from your bank. With just a few big high street banks out there dominating the market, you should really pay attention to the deals that they are offering you on your financial services.

A new report by the Daily Mail shows that most of the high street banks have some excellent deals out there on some of their products, they also have some really terrible deals that will be offering customers terrible value for money and will not be very good financial choices.

Whether you are looking for a personal loan, paying off your credit cards and looking for a better rate while you do so, or simply like to save a few pounds each month for rainy day, by carefully selecting what you say yes to and what you say no to, you will be able to take the good while avoiding the bad deals that are available from the banks.

For example, while the Abbey is paying 7.25% pre-tax on its fixed rate monthly saver account – an excellent rate in the current market – it reduced the rate that it pays on its instant access Isa at the end of May from 5.6% to 4.55% and 5.25%. This is a huge difference on what you will be paid from the same institution.

Meanwhile, other lenders are focusing their advertising on the great rates they are offering on loans and mortgages, whilst putting the high arrangement fees in the fine print.

It pays to look closely at what your bank is offering and not assume the your own bank offers exactly the same products as the others. It is fine to shop around. It is virtually certain that some of the offers they give you will be great, and some will be terrible, so read them, be a discerning consumer, and choose the options that suit your needs.

Posted in Bank charges, Banking, Borrowing, Consumer Credit, Credit Card, Debt management, Financial news, Financial products, interest rates, mortgages, Overdrafts, Personal loans, Savings, Secured loans, Spending, Tenant loans, UK Finance, Unsecured loans | No Comments »

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