Category Archives: Balance transfer

Huge rise in number of credit card fees

It has been revealed that credit card companies have introduced an astonishing 31 different fee rises recently, a move that could end up costing consumers millions of pounds collectively.

The changes were revealed by Moneyfacts which showed that there had been large rises in fees charged for withdrawing money from cash machines as well as rises in cash interest rates. It has also been revealed that Banks and Building Societies have also increased the commission charged for foreign use as well as increasing balance transfer fees.

Alliance & Leicester implemented the largest cash fee rise, upping its rate from 2.25% to 3%. This means that withdrawing £250 with your credit card will now cost £7.50. Other banks have also upped their charges with the AA, Bank of Scotland, Halifax and Intelligent Finance all putting up their rates from 2.5% to 3%. Nationwide, Smile, and Yorkshire Building Society also increased fees from 2% to 2.5%.

Smile has increased its cash rate by the greatest amount, pushing up the interest rate for cash withdrawals on its Gold Visa from 14.9% to 23.9%. The problem with withdrawing cash using your credit card is that it is very expensive, first of all you incur a fee and then there is no interest free period. So it is best to avoid taking money out using your credit card at all costs. Comparisons with overdrafts and personal loans, show that borrowing money in this way has always been extremely expensive.

Balance transfer fees have also gone up with Alliance and Leicester increasing its balance transfer fee from 2.25% to 3%.

These new fee and rate rises plus the credit crunch are behind a massive customer move away from credit cards towards debt consolidation loans. Many borrowers are finding it necessary to tighten their financial belts, and this includes clearing old card balances and cutting up cards.

Changing credit cards

If you are considering switching from your current credit card provider to a new one because you are having trouble paying back your balance then it would be helpful if you were aware of a few pointers first.

Many credit card companies offer very low interest rates on balance transfers; sometime this can be as low as zero percent. But there is a time limit on this balance transfer. So for example if you need six months to pay off your debt and the zero percent interest on balance transfers apply for the first six months then this is an option worth considering. This could possible save you from having to pay back possibly hundreds in interest fees.

Make sure you read the fine print on the deal before signing and take care to make all repayments on time. Missing a payment or paying late can result in the lender replacing your great rate with a much higher APR, leaving your paying more than if you had taken out a debt consolidation loan to clear the original debt.

Another danger is if you do fail to pay back the balance within the given time period the zero percent will revert back to the a much higher rate on the card and sometimes this includes the lender back-charging interest on the first six months of the loan as well. This could result in repayments outweighing the benefit of the zero interest on the first six months.

Lenders do have a responsibility to warn you if the introductory offer of zero percent is about to run out. However as a general rule its better not to trust to this reminder jogging your memory, as it can often be buried in small print. Just make sure you yourself are always aware of the time limit on your offer or one morning you could wake up to a big surprise.

Debt consolidators spiralling out of control

For most of us, taking out a large personal loan with which to consolidate all our existing debt is a bad idea since most of us will typically end up owing more than we did in the first place according to recent research.

As there are now more and more people defaulting on their loans banks are increasingly feeling the pressure so don’t be surprised to see banks tightening up one their lending criteria as well as pushing rates on personal loan rates higher and higher. For instance the lowest personal loan today is close to 6.9% while just one year ago it was more like 5.9%.

More and more people believe they will never be debt free and over 8 million people who take out loans to consolidate debt will find that they actually owe more after 5 years than they did, according to research from moneysupermarket.com.

The study showed that 12.7 million Britons had taken out loans to consolidate some or all of their existing debt. However 8.4 million of those people continue to build up more and more debt.

A third of people who have taken out debt consolidation loans now feel that they are trapped by debt and that their debt is actually spiralling out of control. Only 13% of people who have to loans feel that it was a positive decision.

If you are thinking of taking out a personal loan make sure you shop around to find the right deal for you.