Thrift is a Virtue
I told Pauk ’thrift is a virtue’ as he paid for the round that came up to about £25.00, He lived further than everyone else, having this round on the last call meant, He will be more than likely to miss his tube home, which will add another £50.00 to the night out for the minicab, meaning, he would have spent a whooping two full days income after tax on a night out, that started at 6.00pm
Earlier on Friday afternoon, he decided, he was going to be thrifty and go straight home after work, but there seems to be a little chemical that is released at 5.00pm in his brain that goes ‘come on you have done a good hard week of work’ ‘you derserve it son’, ‘life is for rent’, ‘lets have some music today’, ‘lets celebrate life’
Everyday millions of us seem to spend money on credit cards, money we should be not bespending because we fear we are missing out. In the process the banks and the credit card lenders carry on making a fortune from consumers who because the simply cannot control themselves to stop spending.
Will Paul ever get hold of his finances, a brilliant worker once bankrupt, still in debt but is extremely generous. Paul’s answer to being thrift on Fridat was ‘life is for rent mate, do you think you can take your million pound london property in marylebone with you when you go. You know, life is for rent’ saying out again the tag line from the song by Dido. ‘Hei when do you thing your tenancy is going to end’
That got me to thinking, though to me it seemed like a cop out, it had its merits. Being all that organised to Paul was not the most important thing, he has a certain recklessness that made him more creative and the person who always made the party, he seemed less stress. He did not seem to carry the guilt that many of us do after spending on what we thought was not necessary the night before or the day before. He worked very hard but was fully aware of playing hard.
I think one needs a balance of ‘life is for rent’ and thrift is a virtue, and credit cards are there to make ‘life is for rent’ and ‘being thrifty’ the modern lifestyle.
Christmas Credit Card Bills
I guess the initial shock for most from the christmas card credit card bills are slowly sinking in now. If you were using your cards for rolling credit whereby settling the full amount at the end of each month, most will find it quiet impossible to do it in January. Generally the estimate of your spending would be double on the bill.
The solution for this is to pay 50% of the bill at the end of January and cut down the spending drastically for the next eight week and bring the card back to a zero balance by the end of March or bring it back to its normal limits by March.
Businesses all around the developed world have tremendously difficult time in January and February because of the over expenditure in December.
You will also find that you would have had to skip on some essentials and most entertainmet in January.
The solution for this is to have a small Christmas fund, ‘let’s face it’ we cannot avoid Christmas neither can you avoid spending unless you want to avoid your family and friends.
The Christmas fund should be set up by March at the latest, by calculating your entire Christmas expenditure and dividing it by 9 or 10 times, will give you the amount you need to put aside every month for your Christmas and New Year celebrations in 2010. Try it, it will be a lot easier, at the end of November you might even decide to give Christmas a miss and but something for yourself for the full amount or go on holiday, thus not being put in a spot to get lots of Christmas presents.
Buying gifts a year ahead, does not really work as the gift would certainly be out of date, but you can start in October since you would have already saved quiet a bit by then and it will not be a strain on your finances. Planing the gift for Christmas from October will certainly make Christmas less stressfull.
Embarassing moments with your credit cards
All credit card users have had the experience in the past, ‘sorry sir/madam you card has been declined.
With the increase in credit card fraud, the credit card providers are increasing the number of safety checks for card users. If you do not use your card regularly for large purchasers, chances are when you do use it, it will be declined and if you are lucky you will get a phone call immediately from the fraud department and your card will be released for use. However at that juncture the damage to your ego would have been done.
The best way round this is to always call your bank or credit card provider in advance before using your card, even then they will not be able to guarantee it will not be declined as the system is an automated one and it studies your regular usage pattern.
Also if you used your cards during Christmas you are going to find that you are paying far more for your Christmas presents than anticipated unless you pay off the entire amount at the end of January.
I think the next 10 years is going to have a very low uptake on credit cards as more and more people realise if its not used as rolling credit only it becomes fantastically expensive.
The average credit card interest rate rose from 15.89 per cent to 16.28 per cent in December, according to the Bank of England.
The increase came despite the fact the Bank held the base rate at a record low of 0.5per cent over the same period.
The resulting gap of 15.78 per cent between the official bank rate and the average amount charged on credit cards is now the highest ever recorded.
To Buy or Not to Buy
Your sofa set looks a mess, it has served the family well, the dogs and the kids. It is now looking aged and you toddler has been playing make beleive horses and circus tricks on it, the cushions have lost their bounce and the leather has started to rip.
You go online and check your bank account and there is no way you can afford the new three piece set, the feeling to get rid of the old one is starting to overwhelm you, its an eye soar, your guests must think you are broke…. the feelings of disgust with it grow each day.
Then you look in your wallet, there is your answer, your credit card…. you already have an unpaid balance on it, you decide you will swipe it and get that lovely white sofa set into your home.
So how much is tha sofa going to really cost, think about it, if you have an unpaid balance already on the card, the sofa can easily end up costing you double within a year, that is provided you clear the balance in a year.
So should you purchase the sofa…… the answer is a resounding no, unless you can clear the full balance first.
It is better to feel embarassed for a few more months than to induge in it. Lets face facts if you were living in a place where you did not have visitors you would not bother.
The lesson is, very often we get into unecessary debts to keep up perceived social status and credit card companies make a fortune from us, simply because of this sentiment we have. So just bear without it for a few more months. If you cannot buy the sofa for cash, or if you buy it on your credit card and cannot clear the full balance within the stipulated interest free period, do not purchase the sofa.
I would personally be happier to be in a freinds home with a broken sofa rather than my friend to be struggling with debts. Your true friends will appreciate your honesty and if you have a rich one, he might throw in the sofa for you. Friends generally appreciate friends who have disposable cash more than they would someone who has a nice sofa. A person with disposable cash is more likely to come out with you when you want to go out for dinner or for a drink or follow you on a short holiday. Cash is King…….
Going Bankrupt after Credit Cards
Credit Cards are a gift from the financial services if used wisely but it is the knock on the door from bailiffs when misused. It is common to buy items you don’t need when you have access to credit. It is born from mans weakness and desire for material goods to look good on the social ladder. Well, they are those who use them genuinely to get themselves an education or to invest in a business.
There are thousands of people in the UK going bankrupt every month simply because the minimum payments for Credit Cards they have used have become more than they can afford. Its common to have more than one credit card in the UK. This is really not necessary and can be the start of a downward spiral of interest charges.
The secret is to have one credit card and one credit card only and to ensure the full payment is made at the end of the month. It is ok to have the second card as an emergency, in case the first one does not work. It is common for Credit Cards to be rejected at the point of payment if the card has not been used for sometime. This is a security measure exercised by most banks and credit card providers.
It is common in the UK to have a £30 – 40k Credit Card bill and if you were to pay the minimum amount for two or three years you would have actually paid about the same amount in interest. During the boom period a 30-40k debt was ok for the sole trader or the sales person who worked on a commission basis as nett income was often in the £10k category.
Credit cards typically offer around 30 – 60 days of free credit depending on the date the purchase was made, . if it was at the end of the credit card billing period or at the beginning of the billing period.
What happens if all these minimum payments get to the point you cannot service them anymore, especially with the penalties piling up fast. Firstly thank God you are in the UK, why? because the Government has kindly created a financial tool called bankruptcy so you can start again from scratch and forget your old debts. If you do file for bankruptcy and succeed there is a good chance you will never have access to decent credit for the rest of your life, unless you changed your name.
If you do not own any property you are lucky, if you have owned a property and have decided to transfer it to someone else or sell it before petitioning for bankruptcy, it will be seen as an offence and will be deemed as fraud.
The first step is you need to tell yourself you do not need to or you do not own anything, that is the first hurdle. You might say what about the stigma of being known as a bankrupt……., well the stress of having the bailiffs on your back and constant calls from the Credit Card companies is far worst. In the UK becoming bankrupt is straightforward and can be done by yourself without using or middle man or an agent.
You need to go online and fill up a bankruptcy form called the statement of affairs from insolvency.gov, or yes there is a new name for bankruptcy and it does not sound as bad, it is called insolvency. You need to be 100% honest when filling up this form, because the insolvency officer also known as the official receiver will interview you and cross examine you regarding your form, your savings, your businesses and your assests.
In London going bankrupt is a one day process in the High Court of Justice and will cost you around £500.00 cash.
At the High Court of Justice you will need to first make a payment and then get your forms stamped saying you have made the payment. You will then be directed to a room where you will need to submit this form and you will need to swear before the comission making in a sworn affidavit. After making the sworn affidavit you will have to return after lunch at approx 2.00pm to the judges office. Here you will find approximately 20 – 30 like minded people as yourself who have overspent on their credit cards. They will normally blame their employers, family members, business, the economy and everyone else except themselved for their predicament. If the judge is happy with what you have said your bankruptcy will be granted, if not you will have to go out of court, loose your £500.00 and face the wolves.
Once your bankruptcy is accepted and the sworn affidavit and the statement of affairs form is handed back to you the official receiver will officially be in charge of your estate and whatever you own. Seeing that you have arrived in this junction, it would mean you probably own nothing, and have sold off everything paying Credit Card interest charges and penalties. As Warren Buffett says, don’t buy things your don’t need during the good times, you will find yourself selling the things you need during the bad times.
The official receiver will phone you for an interview in a few days. If you have a steady job and still have an income you might be ordered to service some of your debts (income payments order, the court will not make an income payments order, neither would an income payments agreement be agreed that would leave you too little income to meet the reasonable domestic needs of you and your family, if an income payments order or an income payments agreement is made against you, the payment will usually stop after 3 years) the final amount are up to the discretion of the official receiver. After a year you need a letter from the official receiver saying you have been officially discharged of your bankruptcy, if you do not receive this letter, your debtors than have a right to pursue you again for your debts.
NatWest and HSBC No to Credit Cards
The move follows a similar decision taken last year by HSBC and means two of the largest credit card provider are restricting access to loans – the latest example of British banks refusing to lend money to anyone but the safest customers, despite being implored to lend money to consumers by the Treasury.
Those who want to apply for a NatWest/RBS credit card must have a current account with one of the banks. Having a mortgage or savings account from the group will not be enough. The change took effect on October 1.
Louise Bond of uSwitch.com, the price comparison service, said others could follow suit, leaving consumers with less choice.
“This isn’t the first time we’ve seen a credit card provider do this and I certainly don’t think it will be the last. This move minimises the risk for banks but at the same time it also limits consumer choice,” she said.
“With a market-leading 15-month 0 per cent balance transfer credit card, it’s quite disappointing that the deal is open only to customers who have an RBS current account,” she said. “Given that the RBS fee-free current accounts pays just 0.1pc interest on credit balances and charges 19.24 per cent on overdrafts, this is uncompetitive to say the least.”
Both HSBC and NatWest/RBS are in the top five of the biggest cred card lenders, with a signifcant share of the 66.1 million cards outstanding in Britain.
Many people rely on credit cards as their main source of borrowing, with £139 billion spent on credit cards last year – the equivalent of £3,088 for every adult in the country.
According to the Bank of England the average interest rate on a credit card is now 18.13 per cent — the highest rate since records began a decade ago, despite the Bank rate being at an all-time low of 0.5 per cent. Experts say this is further proof that lenders are tightening terms, even though the economy is showing signs of improvement.
The trend towards offering the best deals only to existing customers was also appearing in the personal loans market, Ms Bond said.
A spokesman for RBS, which is majority-owned by the taxpayer, said: “We are focusing where we can on helping our current account customers, savers and mortgage borrowers and this move helps us improve the service we can provide to them.
“We are very much open for business and welcome new customers who want a current account and a market leading credit card from us”.
HSBC confirmed it is only offering cards to existing customers. It said this had been the policy since the worst of the recession hit last year.
A spokesman for the UK Payments Association, which represents the card card lenders, said that competition would remain, but admitted tighter terms were “a reflection of where the market is at the moment.”
Credit card crisis to grip Britain
IMF expects £1.5bn of consumer debt across Europe will not be repaid, much of it in Britain which has the highest number of credit card borrowers on the continent.
Analysts say failure to pay credit card bills is likely to increase as unemployment rises and the number of personal insolvencies, which reached 29,774 in the first quarter of the year, continues to rise.
The IMF said the crisis would echo the problems already felt in the United States, where it expects 14 per cent of the country’s £1.16bn credit card debt to go unpaid this year, the Financial Times reported.
The newspaper said National Debtline, the UK charity, had received 41,000 calls in May about loans, credit cards and mortgage arrears – double the number it received in the same month last year.
In the United States, credit card defaults have been rising for months as a sharp rise in unemployment takes its toll on overstretched consumers.
Barclays, Britain’s biggest credit card lender, said in May that overdue payments or defaults had risen in the first three months of this year.
Barclay Card Interest Rates
Barclaycard, the UK’s biggest credit card provider, has been accused of keeping its customers in “perpetual debt” by lowering the minimum repayment on credit cards.
From next month the minimum repayment for a portion of customers will be lowered from 2.25 per cent to 1.5 per cent. But consumers groups have warned that the move could add thousands of pounds to borrowers’ interest charges, meaning it will take many more years to repay the debt.
A cardholder with £5,000 at an interest rate of 15.9 per cent, making the current minimum repayment, will take 31 years to repay the debt with interest charges of £5,900.
At the new minimum repayment, the debt will take 98 years to repay with interest charges of £22,300.
Barclaycard’s announcement came as new research shows 0 per cent balance transfer deals have all but disappeared for most borrowers – meaning most people are forced to stay on cards charging high rates of interest.
Almost 2 million consumers have been rejected for balance transfer deals in the last year, representing 57 per cent of all credit card rejections, according to uSwitch.com, the comparison website.
In total, £3.5 billion of credit card debt is now stuck on interest bearing credit cards as consumers cannot switch to their next 0 per cent deal.
Millions of consumers are currently struggling with credit card debt as the recession takes its toll on household finances. But if borrowers only make minimum repayments on credit cards, their debt problems will become much worse in the long-term.
Martin Lewis of moneysavingexpert.com, a personal finance website, says: “Minimum repayments are sheer genius for card companies as they get to look generous by ‘cutting costs’ when they’re actually keeping customers perpetually in debt.
“As the amount you owe reduces, so does the amount you repay, meaning most people are barely covering the interest that accrues, and hardly eating into the amount owed at all.”
A Barclaycard spokesman said: “We are doing this to help customers. This is an option we are giving to selected customers for them to be able to make a reduced minimum repayment for a limited period if the customer chooses to do so. We understand that some customers may appreciate this additional flexibility during the current economic circumstances.
“We have written to the customers selected and been very clear about the dangers of only ever making their minimum repayment and that it is always best for the customer to repay as much as they can.
“As always, customers can pay any amount over the minimum repayment and can choose to return to their existing minimum repayment by giving us a call when they get the letter
John Lewis
0% on all Balance Transfers, fixed for the first 6 months from account opening,
conditions and 2.5% Balance Transfer fee apply (£5 minimum).
0% on all your purchases for the first six months from account opening.
Typical 16.9% APR (variable).
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From a standing start back in 1998, we’ve grown into the world’s largest pure online bank. This success has come about through helping customers to understand and manage their money more effectively. Across our main areas – borrowing, saving and insurance – we offer value for money and great service.
This is what will happen if you have the unfortunate luck of loosing your job or having a pay cut
Whatever Loan and Credit Card Companies Say…..They Ultimately Want to screw you for your Money….. Trying missing one payment and then you will see what they can be like. It does not matter that you have been an exemplary client for 8 years. Eg.
Staff: Sir you Direct Debit was returned unpaid, you will have a charge of £16.00
Me: Ok
Staff: Sir, can you please tell me why your direct debit was returned unpaid?
Me: The account ran out of funds
Staff: Can you please tell me why this is, its your responsibility to ensure the funds are there, can you make a payment now? if you do not make a payment it will affect your credit file.
Me: I wish I could but there is no money in my account
Staff: Can you give me an exact date when there will be money and when you will make payment otherwise there will be an additional late payment charge of £16.00
So make up your mind if you really need a credit card……
Me: Quiet
Staff: Are you there ? I need a date
