Past Articles for September, 2006

According to the American Express study, a quarter of parents spend over £100 on their child’s first birthday party with an average of £84 on presents.

However, once costs for invites to other parties and the necessary gifts are added up, the firm claims that the average family with two children spends £450 each year on parties, which may take many into debt.

“Throwing parties can be a joy for parents and their children alike, however many families find that the cost of entertainment, venues, catering and presents soon adds up,” said Kate Harris, vice president of UK partnerships from American Express.

Clowns and face-painters can add to the bill that parents have to pick up and Peter Robertson of Twizzle Parties said that parties are becoming more extravagant.

While he said that many parents did not object to cost, proper debt management can mean that parents can enjoy the party nearly as much as their children do.

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It claims that of the 400 machines located at university premises, half charge a typical fee of £1.50, which adds 15 per cent to a withdrawal of £10.

Stuart Bernau, executive director at Nationwide, said: “Students need to be particularly alert when they are withdrawing cash as charges to access their own money quickly add up and hit hard in the pocket of people already facing the challenge of making ends meet while they are studying.

“Across the UK consumers will this year pay £250 million to access their money from cash machines, but those charges can be avoided if you seek out a machine that is free.”

His warning comes as students prepare to graduate paying up to £70,000 for their degree, according to one recent survey, so every pound saved can help undergraduates clear debt.

Nationwide added that it does not charge fees for cash withdrawals and called for other firms to do the same.

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Due to increases in balance transfer fees, the cost of switching to an introductory offer of no interest means that “the vast majority of nought per cent balance transfer deals will become largely worthless,” a spokesman from the firm said.

Eddie Nott, deputy chief executive of M&S Money, commented: “You would like to think that nothing could be cheaper than nought per cent interest, however the spread of credit card balance transfer fees has in some cases wiped out much of the benefit of switching.”

According to M&S Money research, balance transfer fees of four per cent can become equivalent rates of 14.5 per cent and thus consumers may actually add to debt by switching to a zero rate offer.

He urged consumers to look at more than just the headline rates and carefully calculate what savings, if any, they can make by switching cards.

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According to the Datamonitor report, Britons’ loans and credit card debt total £215 billion and the average debt of £3,008 is twice the average for western Europe.

This report comes out on the same day as a Visa report claims that Britons are the worst in western Europe for budgeting for shopping.

With poor financial skills and debt management, Paul Marsh, financial services analyst at Datamonitor and author of the report, said that firms are looking to the continent to offer loans as bad debt levels put lenders off operating in the UK.

“The UK is an increasingly difficult place to do business, due to the highly indebted nature of the population,” warned Mr Marsh.

The report labels the UK a “naïve market” when it comes to loans and debt and warns against habits of switching loans between credit cards.

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In the W3 Debt Solutions report, the amount of people in their 20s taking out an Individual Voluntary Arrangement (IVA) has soared by 90 per cent in half a year.

“I am very concerned about the sharp rise in IVAs among 20 to 30-year-olds,” said Greg Mullarkey, chief executive of W3 Debt Solutions.

“Living with large debts blights lives and it is sad that so many young people are forming poor budgeting habits at such an early stage in life.”

IVAs are legally binding contracts between a borrower and all of their creditors to repay only what they can realistically afford, with the balance of the debt being written off.

Yet while twentysomethings had the largest rise in the amount of people turning to an IVA, those in their 30s are still the largest proportion, accounting for a third of all such arrangements.

“Our advice to young and old, without sounding too trite, is to live within your means and resist cheap credit, despite its obvious temptations,” concluded Mr Mullarkey, urging proper debt management.

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In Visa’s new shopping IQ test, Britons came last at researching products, second bottom at both trying new products and saving money and fourth from bottom at self-control.

With such poor self-control of finances, it is hardly surprising that Britons owe around £1.2 trillion in debt.

These findings are backed up by Datamonitor, which today published its own debt study and found that the UK accounts for a third of all western European unsecured loan and credit card debt.

Visa urged Britons to take heed from the findings and follow their European neighbours in keeping out of massive debt.

“This study shows that there is potential for us all to improve our shopping IQ to some degree and pick up some tips from our European neighbours,” said Greg Twitcher of Visa UK.

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According to the Royal Bank of Scotland, the average student at Birmingham University gets £152.50 every week from their parents to help with living costs and to clear debt that they accrue.

However, not every student is lucky enough to get their parents to bank roll their time at university and 45 per cent said that they had to take on a part-time job.

However, this proportion could rise further this year as tuition fees near-treble to £3,000 per year, increasing the amount of debt students will have to start saving to repay.

Because of this, Paul Jeffries, head of student banking at the Royal Bank of Scotland, urged students to craft a debt management plan before they started.

“The key to managing your finances effectively is careful budgeting. We are encouraging more students to include financial planning in their university preparation,” stated Mr Jeffries.

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According to Sainsbury’s Bank, personal loans to cover education costs are set to rocket this year as tuition fees near-treble to £3,000, yet many could add further to this debt by not shopping around for the best rate.

“As students go back to university, many will face a significant increase in their living expenses,” said Steven Baillie, loans manager at Sainsbury’s Bank. “As well as students taking on paid employment to help cover this cost, some of their parents are also taking out personal loans to help.

“However, people need to ensure that if they are going to do this, they shop around for a competitive rate.”

Tuition costs are rising, with Children’s Mutual claiming earlier this month that the cost of some courses will rise to £70,000 once living, travel and other expenses are factored in.

Sainsbury’s reinforced this claim, saying that the cost of living could rise by 21 per cent this year for students and urged borrowers to find a competitive loan if they do take one out.

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According to Moneyfacts.co.uk, rising bad debt levels and a cap on late-payment fees means that many lenders are raising the interest rates on credit cards, increasing the time it takes for people to repay loans.

“Rising bad debts and the lost fee revenue has left many providers with no choice but to look for alternative avenues for income,” said Lisa Taylor from the website. “For many consumers this rise may go unnoticed – but should they take the time to look at the long term consequences, they could be in for a nasty surprise.”

This summer the Office of Fair Trading made credit card providers limit how much they could charge on late-payment fees, a large source of income for lenders.

However, Ms Taylor claims that this means that with interest rates rising to recoup losses, those only repaying the minimum amount on their card each month will take much longer to clear debt.

She recommends that consumers look carefully at their next statement and take some form of debt management plan to make repayments.

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The independent financial advisor service claims that nearly half of the UK’s pensioners are unaware of their entitlements and tax rights.

In addition, future pensioners are also being urged to plan for the future to ensure that they retire in comfort rather than struggling to clear debt.

“No one likes paying more tax than is necessary, and no one likes missing out on something that is rightfully their own, so we are urging people to either kick-start their pension and tax planning or review their current situation with urgency,” said David Elms, chief executive of unbiased.co.uk.

Earlier this month, Sesame found that a quarter of pensioners admit that they are unlikely to clear debt before they die due to rising costs.

Poor planning for retirement or a lack of regular checks on entitlements means that many pensioners are missing their credits or paying Additional Voluntary Contributions.

Mr Elms urged both pensioners and those planning for retirement to take on debt advice to ensure that they get the most out of their later years.

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