Past Articles for March, 2008

British holidaymakers are wasting millions of pounds each year on what most people would consider to be junk, according to a recent study.

Figures compiled on behalf of Cahoot have shown that a third of British people feel compelled to spend money unnecessarily while away on holiday, which for many will mean adding to their debt management burden.

Items such as sombrero hats, stuffed donkeys and handbags are among the favourite ways for British holidaymakers to waste their own cash on holiday, the financial services firm reports.

Most of these sorts of frivolous transactions are carried out with cash, but around 16 per cent are made using credit card debt, which has to be paid off on return to the UK, Cahoot explains.

The online bank’s director Matthew Timms commented: “Holidays are all about fun and splashing out, but as our research shows it is still important to keep a close check on your finances when you are taking a break.”

Earlier this month, the Nationwide Building Society warned that many holiday making Britons are unwittingly liable to foreign currency loading fees when they spend money on their credit cards outside the UK.

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Gaining a full understanding of what a particular deal entails is crucial for consumers looking to take on credit card debt, it has been suggested.

Chris Tapp from the Credit Action charity has compared the process of taking on a credit card to that of buying a car, making that point that it would be foolish to take a new vehicle home based on just one of its attributes.

While the headline rates of interest on credit cards are an important aspect to consider, it is vital that people take the time necessary to fully familiarise themselves with any borrowing deal they enter into, he continued.

“Make sure you understand the whole product,” said Mr Tapp.

“That is the way to avoid getting hit with all kinds of charges, to make sure you are only borrowing as much as you can pay back.”

Data released by MoneyExpert recently showed that there are more than three million people in the UK with five or more credit card deals in place.

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Parents around the UK are increasingly discussing issues of debt management with their children in the light of the trend toward borrowing that has gathered pace in recent years.

The overall level of personal debt nationwide has increased threefold in the past ten years and figures from Engage Mutual Assurance have shown that 81 per cent of British parents with children aged under 18 have already discussed financial matters with their offspring.

Almost 2,000 people were polled as part of the recent study and two-thirds said that they have been aiming to teach their children about how to avoid debts as they grow older.

The research discovered that debt management has become a more pressing concern among British parents than religion, sexism and terrorism.

Karl Elliott, 3GB spokesperson for Engage Mutual Assurance, said: “The fact that so many parents are prioritising talking to their children about money is a reflection of the increasing strain families are finding themselves under to make ends meet.”

Figures released recently by the SaveBorrowSpend website indicated that there are currently more credit cards in Britain than there are people.

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British consumers have been urged not to panic if they are having difficulties in meeting their mortgage repayment demands.

The John Charcol company has aimed to highlight the importance of seeking out expert advice if they are concerned about their mortgage-related debt management issues.

Homeowners who are due to remortgage should focus on affordability when agreeing a new deal and would-be first-time buyers need to assess their options fully and decide if it is the right moment for them to be acquiring a property, according to John Charcol.

“It is important that existing borrowers, who are due a remortgage, do not panic,” said Katie Tucker, John Charcol’s technical manager.

Ms Tucker went on to suggest that the Bank of England will not help Britons in their efforts to become debt free by cutting interest rates until at least May of this year.

The bank opted not to reduce the base rate of interest this month, after having done so in February and in December 2007.

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A price comparison firm has warned that UK consumers are being left out of pocket by fee-paying bank accounts.

MoneyExpert is convinced that people who are making use of so-called packaged accounts are paying an average of £11.61 for the privilege but are getting very little in return.

The incentives that are offered by banking groups in an effort to attract consumers to fee-pay accounts can often seem attractive but tend not to be good value for money in the long-term, the company has claimed.

Some people use packaged accounts because of the promise of cheap credit card debt in return, but this and other incentives can be secured elsewhere for those who take the time to seek them out.

“The basics of a typical fee-paying current account are frankly terrible value for money,” said Sean Gardner, chief executive of MoneyExpert.

“You don’t have to be a mathematician to see how an average interest rate of just 2.1 per cent compares to free banking if you have to pay a typical fee of £11 for the privilege.”

Earlier this week, the Nationwide Building Society warned that British holidaymakers could be adding to their credit card debt unnecessarily by remaining liable to foreign currency loading fees while spending outside the UK.

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Anyone considering taking on the serious debt management burden of a mortgage ought to shop around for the best deal available to them, according to one expert.

Sue Anderson from the Council of Mortgage Lenders (CML) has made clear that researching the local property market and the relevant loan deals that are on offer is a crucial part of the home buying process.

And Ms Anderson has suggested that being fully familiar with the mortgage loan options on the market has become increasingly important in recent months as many of the deals offered by lenders are being removed.

“Shopping around is always important, particularly so when the range of choice is narrowing, as it is at the moment,” she said.

Among the resources recommended by the CML for mortgage research are the Financial Services Authority’s comparison tables.

Including mortgage arrears, the typical British household owes close to £57,000, according to data compiled by the Credit Action charity.

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Citizens Advice bureaux (CAB) around England and Wales have reported what the organisation has described as a “worrying picture” of growing debt problems in communities nationwide.

Many thousands of families are struggling to become debt free and a poll of 75 per cent of all the CAB in England and Wales suggested that these facilities dealt with a collective total of 215,000 new debt issues in the first two months of 2008.

Store and credit card debt has remained as the biggest single cause of financial strain for British families, but rises in household energy bills and the cost of living have compounded a bad situation for many.

“These latest figures paint a worrying picture, suggesting a significant number of households are struggling to meet their most basic living costs,” said Teresa Perchard, director of policy for Citizens Advice.

Chris Tapp from Credit Action said recently that there has been an “astronomical” rise in the use of credit cards among consumers from across the UK.

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Holidaymakers have been warned to familiarise themselves with any fees they might be charged for using their credit cards while outside the UK.

The Nationwide Building Society has suggested that foreign currency loading fees will catch many people out and leave them with an increased level of credit card debt when they return to Britain.

Thousands of people are expected to head for warmer climes over Easter and the building society claims that during the same period last year UK credit card users were charged millions of pounds in loading fees.

In fact, the organisation maintains that holidaymakers effectively add almost £650 million to their credit card debt bill on an annual basis by failing to avoid these particular charges.

Jeremy Wood, divisional director at Nationwide, said: “Returning from your Easter break to find charges for using your card abroad is enough to drive anyone hopping mad.”

“People who are planning to go abroad this Easter should be aware of the hidden charges that most card providers impose,” he added.

A report from Moneysupermarket.com recently claimed that more and more UK consumers are seeing their personal finance situation deteriorate.

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The serious problems affecting banking groups in the US and in the UK should act as a wake up call to consumers across the country, it has been claimed.

According to Callcredit, the recent collapse and emergency bail out of Bear Sterns should prompt people with debt management issues on both sides of the Atlantic to reassess their personal finances.

The credit reference company is convinced that the problems that have caused both Bear Sterns and Northern Rock in the UK to face disaster are bound to have a knock-on effect for the world economy and for all consumers.

“In an attempt to avoid debt, consumers need to move away from the ‘buy now, pay later’ attitude and move towards the ’save now, buy later’ mentality,” said Mel Mitchley, director of industry relations at Callcredit.

A report released last year by the Grant Thornton accountancy firm revealed that the UK’s personal debt is now worth more than its annual gross domestic product.

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Millions of British consumers have moved their debts to a single lender over the course of the past few years, according to recent research.

Figures compiled by MoneyExpert have shown that around 6.5 million people around the country have seen fit to use a debt consolidation loan in an effort to solve their personal finance problems during the past three years.

This figure means that almost 15 per cent of all British adults have consolidated their debts and more than 1.25 million consumers have taken up this option to deal with debts worth more than £20,000, the price comparison firm reports.

“It is encouraging that so many people have taken action as you can make significant savings by moving all your debts to one place,” said Sean Gardner, chief executive of MoneyExpert.

“It is crucial that borrowers see consolidation as a wake-up call to get debts under control,” he added.

According to data from the UK’s payments association Apacs, as much as £11.3 billion worth of credit card debt was accumulated in the UK during December of last year.

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