Past Articles for November, 2006

According to the association, the amount of credit and loan debt that Britons took on increased by £0.8 billion in October, compared to £0.3 billion rise in September and a monthly average of a £56 million increase.

David Dooks, BBA director of statistics, said: “October’s loan approvals were boosted by remortgaging, as customers look to fix or reduce their mortgage costs, but this activity, with customers changing their lender, has no significant effect on net lending marketwide.”

Despite the increase in loans, credit card debt decreased by £04. billion during October, compared to the average fall of £0.2 billion.

“Credit card lending continues to contract, with relatively lower spending levels this year, being exceeded by repayments in most months so far,” added Mr Dooks.

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Through an “inner tosser” - someone who tosses money away recklessly the Tories claim that many young people were getting needlessly into debt, with those in Northern Ireland and eastern England most likely to do so.

A Conservative spokesman told the BBC: “Sometimes it’s necessary to use provocative language to grab people’s attention and get them thinking about important issues.

“If our direct approach helps get the message of personal debt across and offers people some tips on how to manage their situation, the initiative will have been well worthwhile.”

The Tories’ latest debt management urgings closely follow calls by the shadow chancellor, George Osborne, for a radical approach to personal financial problems.

Visitors to the website, sort-it.co.uk, can take an “inner tosser” test to determine their unnecessary debt levels.

Writing in the Guardian, Conservative leader David Cameron said: “These are new approaches for a new age, but ones that will continue to demonstrate the Conservatives’ commitment to confronting the problems our society faces today.”

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According to its survey, 12 million people have poor debt management because they are not saving enough for retirement.

Chris Kenny, the ABI’s director of life and pensions, said: “Over 12 million people are still not saving enough for their retirement and many don’t believe that the government’s plans to increase saving will ever be enacted.”

He called on the government to bolster private pension provision to ensure that people see it as a good debt management option.

However, consumer watchdog Which? hit out at the claims, saying that it was “staggering” that insurers were “undermining” the government’s reform plans.

Personal finance campaigner Doug Taylor said that insurers need to regain consumer trust in the industry.

Only then, he says, it be taken seriously as a debt management option, allowing people to have a comfortable retirement.

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Consumers could be wasting as much as £1 billion every year because they are not on the most suitable energy tariff, a consumer finance website has said.

According to the Motley Fool’s poll, 46 per cent of households have never switched providers, despite five per cent potentially saving £300 if they did so.

Commenting on this poor debt management, David Kuo, head of personal finance at the Motley Fool, said: “There are savings to be made if you have never switched energy providers. Typically, someone who has never switched may save around £100.

“Failure to switch is tantamount to sitting in front of the fire wearing a woolly hat and jumper, and moaning about soaring energy prices while chucking £10 notes into the flames.”

He added that Britain’s energy market is one of the most competitive in the world, but consumers need to take advantage of this.

Switching to an online tariff or dual-fuel one could be a good form of debt management, the Motley Fool claims, especially with the series of price hikes that this year has witnessed.

Any consumers looking for advice on how to pay their utility bills should click here .

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Commenting on the collapse of Farepak, which was meant to offer a Christmas debt management plan, the members of the Scottish parliament said that other options could be better.

Dr Elaine Murray MSP, said: “[Credit unions] can make loans available to new members while charging considerably less interest than do major credit providers.

“However, many of their existing members will also want to take out savings or loans to cope with the expense of Christmas.”

MSP Shiona Baird warned that “unregulated banking” exists and told people to be careful of how they make their debt management plans with.

However, credit unions are not-for-profit financial institutions that are controlled by their members, typically providing loans to the financially excluded.

Other forms of debt management exist and for those caught up by Farepack, or are just struggling with their finances in the build up to Christmas, debt advice can help.

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According to credit reference agency Callcredit, four per cent of people have such poor debt management skills that they do not how they will pay for their spending this season.

In addition, the amount of people expecting to spend over £1,000 this Christmas has doubled from one in 20 twenty a year ago to one in ten this year.

Additionally, only four in ten people surveyed expected to spend less than £500, compared to almost six in ten last year.

Despite this warning, Callcredit director Mel Mitchley said that people were doing better with their debt management than last year.

“Generally the picture is looking pretty positive - people are spending more but budgeting better. Instead of using credit to get them through the festive season they’re using the hard-earned cash they have in their pocket,” she said.

“One slight concern is that the number of people who have no idea how they’ll fund Christmas has doubled from two to four per cent.”

Commenting on the news, David Mond from debt advisers ClearDebt, said: “So much financial pressure is put on families at Christmas that many who already have big debt problems are tempted to pile on the credit and deal with it later.

“This is a dangerous option – it’s the thought that counts and an affordable Christmas means less new year misery.”

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Comparing the best to the worst saving, insurance and other financial products, the website found that during the third quarter of 2006, the average consumer could save £3,976.02, up £167.24 on the same figure the previous quarter.

“At this time of year, when consumers’ minds are turning to spending, perhaps not wisely but all too well for Christmas, it’s more important than ever to make sure we’re getting value for money for our money,” said Robin Amlot of Moneyextra.com.

“Shopping around for just the right present for the person you love is second nature. Shopping around for just the right financial product or service for yourself should be too!”

Good management of loans, mortgages and credit card debt contributed to the savings, the website said.

This call for consumers to shop around is timely as Moneyextra.com warns that the poorest value loans are increasing in costs, which will hit those with weak debt management skills even harder.

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To many, this may seem a very early start, but moneyfacts.co.uk states that many high-interest regular saver accounts are fixed for 12 months, so now is the right time to start planning for next year.

Rachel Thrussell, head of savings at the website, said that regular saving schemes were an “ideal” debt management solution.

“On average, we each spend £600 at Christmas time on presents and festivities, so it’s a good idea to start saving as early as possible,” she said.

“Using a regular savings account might be an ideal solution, offering decent rates of return with the security and protection offered by your bank, which cannot always be found within other Christmas saving schemes, as we sadly saw with the collapse of Farepak.”

Ms Thrussell’s comments come as other financial experts urge planning for this Christmas now to ensure that 2007 does not start with debt.

However, by following Ms Thrussell’s advice, she states that consumers can earn enough in interest for a gift next year.

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Energywatch, the gas and electricity watchdog, said that one customer suddenly owed £853 to their supplier as the token meter had not had its prices reset since 2003, negating the supposed debt management benefits of such meters.

Adam Scorer, energywatch director of campaigns, said: “The failure of some companies to update their token meters with price rises is having a serious impact on some of the poorest households.

“People use these meters to budget and manage their household expenditure. For them to be faced with up to 138 per cent increases in their weekly energy costs and forced into instant and long term debt through no fault of their own is unacceptable.”

Teresa Perchard, Citizens Advice’s director of policy, added that token meters already punish poor customers through higher prices and called on suppliers to change their act.

Mr Scorer praised EDF and Scottish & Southern for the speed of recalibration for new prices, a practice that allows customers to ensure that they can calculate an up-to-date debt management plan.

Any consumers looking for advice on how to pay their utility bills should click here .

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According to Moneyextra.com, there is still time to switch credit card debt to interest free offers to ensure that Christmas debt management starts early.

“Your credit card is not just for Christmas, but with an average spend jumping 22 per cent to around £378 on presents, it usually gets little rest in the run up to December 25th. If you have not checked out the best deals yet, you only have a few weeks to do it,” stated Robin Amlot, senior editor of Moneyextra.com.

Tips to help consumers best manage their credit card debt this Christmas include taking advantage of fee-free balance transfer deals, or switching to low interest rate deals.

For shoppers who are better with their debt management, a cashback credit card may be better, but in either case, Mr Amlot urges consumers to act now.

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