Category Archives: Overdrafts

Crack the Crunch by tackling bad habits

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People are making a number of fundamental errors in handling their finance according to Moneyfacts, the comparison website.

It advises people to tackle their bad finance habits in order to stay afloat during these tricky financial times.

One of the worst habits is that of living beyond your means. This fatal flaw is going to see huge numbers of UK adults sinking under unmanageable debt in coming months. People who regularly spend more than their income each month are obviously mounting up debts that they can never tackle. Many of these people will end up using credit cards to pay for basic living costs and then taking out personal loans to clear the credit cards. This is a ticking timebomb, according to MyVesta, the debt solutions provider, and they should know.

Another poor habit is allowing yourself too many credit sources. If you hold a handful of cards each with a limit of thousands there’s always the temptation to splurge. Add to this a number of catalogue accounts or store cards and suddenly all kinds of avenues are open for spending on days when your income is all gone. Moneyfacts strongly recommends paying off the cards or accounts with the highest amount of interest and limiting yourself to only a few once the balances are cleared.

Not being aware of your current financial situation is a big step in the wrong direction. Whilst few people know their exact bank balance, it is always wise to have a handle on your rough debt balance. If you haven’t tallied up all the money you owe in overdrafts, hire purchase, credit cards and loans then you’re burying your head in the sand. By being aware of what you owe you remain in control and can decide which bills need clearing most urgently.

Above all, be aware of missing payments. Many creditors see this as a green light to either slap you with a charge or raise the interest rate on your borrowings. Or both! Whilst borrowing may still be fashionable, there’s no point in spending money unnecessarily. Especially during the credit crunch!

Credit Crunch will hurt youngest most

One of the benefits of being old has to be experience: the credit crunch that most people are experiencing with the UK’s economy has all been witnessed before. What is going on today with financial institutions last happened in the early 1990s, but even before that the older generation have witnessed times when wanting something meant saving up, not taking out yet another cheap loan.

Whilst we hope a full blown recession won’t be seen, the boom times seem to be definitely at an end for now and that means a change in financial habits. We are finally getting a wake up call that we cannot continue to borrow indefinitely and have to live without some of the things that we feel entitled to.

This adjustment should not be too difficult to take on board for older generations, but it might be a bit more of a tough adjustment for younger people. The young will have little recollection of the late eighties when the economy last went into recession and no memory of the days when loans were something only for businesses or buying a house.

The nation as a whole has grown used to the concept of regular holidays, new cars as a luxury, not a necessity, and splashing out on meals and clothes whenever the need takes. However, for many of those older than the ‘baby boomers’ (those born post-war), the memories are still fresh of the days of ‘scrimp and save’.

Every generation has seen greater prosperity in this country and the days of ‘make do and mend’, ‘grow your own’ or clothes made from a penny pattern seem like myth to the youngest adults today.

The concept of going overdrawn was once upon a time considered shocking, and for many of the older generation today that viewpoint still holds. For these people, getting back into old ways of careful budgeting and knowing where every penny has gone will come easily.

For the younger generation, used to falling back on easy credit, or borrowing money to indulge a whim, budgeting is going to come as a sharp shock. The fact is that right now lenders are either unwilling or unable to lend money as lavishly as they used to, so if you don’t look after the money you have, you can’t bank on an easy loan to bail you out.

No refund on unfair bank fees

It has been revealed that thousands of customers who took their banks to court in order to reclaim their bank charges and won may never actually see their money.

It is estimated that High Street banks have paid out somewhere in the region of £1 billion in reclaimed charges in the last year. However there is a growing amount of evidence suggesting that banks are increasingly using delay tactics in order to avoid paying back their customers. These delay tactics are even being used in cases where the bank has been told to repay by the courts.

Many unhappy customers who thought they were going to get their money back after banks were deemed to be charging illegal fees are now finding that their banks are stalling on paying them amounts that are in some cases worth thousands of pounds. For customers forced to take out debt-clearing loans on charges since deemed ‘illegal’, this is sickening as the loans are still charged interest whilst the customer awaits the refunds to clear them.

It is very common for banks to lose their cases in the county courts because they do not present a defence. However once they have been ruled against they appeal the judgement which ends up delaying the case for weeks and months.

Banks are also asking that judges dismiss cases in which they have been ruled against pending the outcome of a result in the High Court of a case brought by the Office of Fair Trading.

While the FSA has allowed banks to hold off on payments to customers who have requested repayments from the banks directly this ruling does not carry over to county court judgements.