Kevin Brennan, Minister for consumer affairs feels the balance between credit card providers and the customers who use them may have got a little uneven. Few would disagree with that.

For the past few months there has been a consultation taking place which you can read about at www.bis.gov.uk/creditconsultation
The consultation is now closed but if you feel nobody consulted you then you can still leave comments on the site if you feel you have something to contribute on the matter.
(Why is the usual government way is to only ask organisations who benefit from, or those organisations opposed to, any proposals while apparently ignoring the consumers themselves? Surely the main focus should be on asking the consumers, the electorate, what they think?) The comments section on the website is an opportunity to put your point of view though how much weight it carries, goodness only knows. We know we have a government that doesn’t listen to people but they might pretend to now with an election looming.

The subjects up for consultation were:=
Allocation of payments – with lower interest debt being paid off first
Minimum Payments – whether minimum payment requirements should be increased
Unsolicited Credit Limit Increases – Card limits increased without consent
Re-pricing of existing debt – Increasing the interest rates without proper explanation (or justification)
Simplicity And Transparency – Making it clear what the costs are on credit cards

There are literaly hundreds of comments. Many pointing out that whilst increasing minimum repayment requirements on credit cards is a good idea in principle, the practical affect would be to push many people into bankruptcy. Hopefully this is not what the government wants and they will resist the temptation to simply increase the minimum payments on existing credit card accounts. It would make a lot of sense to increase the minimum repayments on any new credit card accounts and that way people would be better prepared and better able to deal with their repayments.

The fundamental problem we have with credit cards is that many of us use them in ways they were never designed to be used. Credit cards are a flexible credit facility and are very useful to use if the car suddenly needs repairing or the boiler breaks down. They are perfect for dealing with those sudden and unexpected expenses but they need to be repaid fairly quickly or they become a very expensive debt.

The fact that they are so expensive to use and very profitable for credit card companies has led to those companies to encouraging us to use them more and more. Credit cards are now part of our everyday lives and people have been encouraged to use them for their everyday spending.

Consumers have been misled by advertising which suggested that the purchase of a carpet whilst on holiday using your credit card made perfect sense. It might be a convenient way to deal with the currency issues but that carpet is probably still being paid for ten years later.

If you fancy an interesting little financial challenge I suggest you work out how much your credit card costs you if you make the minimum repayments. You can set up a spreadsheet very easily and enter the amount of your credit card debt. Just calculate the interest each month and delete the minimum payment.
The results will, I am sure, shock you. Paying the minimum amount keeps the debt going for decades and the money the credit card company makes in interest is astronomical.

There is no question consumers have been taken advantage of by the credit card companies. Rather than being happy to offer a flexible credit facility the providers have done their best to get consumers deeper and deeper into debt. The real purpose of those cheap credit transfers we all love to use has been to maintain your current debt at high interest rates while you pay off the lower interest rates first and oh, so slowly. The companies have been coining money faster than the Royal Mint.

Now I am not saying the the credit card companies are doing anything illegal as unfortunately the law allows all sorts of practices that we might think should be illegal. If you are a legitimate legally registered money lender it seems you can do just about anything you like and the only people who grumble are the people who owe you money and they can’t do anything about it.

If you decide to jack up interest rates from say 6.9 to 19% to 25% to 35% you can. Nobody is going to stop you so why not? It may seem immoral to charge 50 times the official bank rate but it is not illegal. The Mafia would probably charge you less, though their collection methods are a little more aggressive than the credit card companies.

If you have been on the receiving end of credit card companies debt collection calls you might wonder about that. The constant phone calls and demands for payment can take a terrible toll on people’s health and mental condition. It is slow torture as you struggle to make whatever payments you can and go without food and heating in an attempt to meet your repayments and after all that you then get hit with additional charges for late payment or missed payments even though you later did indeed make the payment so it was not missed.

The credit card companies are obviously entitled to make a profit and credit cards are a useful financial tool if used for their proper purpose but the greed of the credit card companies shows that, just like the banks, they do not care. They do not care about consumers. They do not care about customers and they certainly couldn’t care less what happens to the country. The will quite happily encourage everyone to get deeper and deeper into debt so long as that makes them money. They don’t care about whether you can afford to eat or heat your home.

Your ‘flexible friend’ is the potential enemy you keep in your wallet. Yes they can be helpful if kept within certain limits and used for their correct purpose but allow them to become a part of the way you live your daily life they could destroy you and your family and everything you have worked for.
If you want to leave comments on the government website you can do so here… http://www.bis.gov.uk/comments-on-credit-consultation

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)

Paying Mortgage With Credit Card

A report was published yesterday by Shelter, the housing and homeless charity, that should worry a lot of people. The report was based on a survey of householders and carried out on their behalf by Yougov.com. The results suggest that a large proportion of the population are using, or have used, their credit cards to help them pay their mortgage or rent at sometime within the last twelve months.

Something like one in sixteen households have apparently used a credit card to help them pay their mortgage or rent and if this is the case, it suggests that things are not quite as rosy in the economy as some would like to suggest.

This comes at a time of historically low interest rates and, we are told, many people are taking advantage of the situation to pay down their credit and debt. It should also be pointed out that credit card interest rates are at a historic high when compared to the bank rate. Overall personal debt levels are apparently reducing and many people find themselves paying hundreds of pounds less each month on their mortgages than they were two years ago. This has enabled them to take the prudent step of reducing other debts using the extra money they have available each month.

The biggest problem would seem to be with the many struggling working families who may have lower incomes following redundancy as a result of the recession though it is not entirely restricted to those on lower incomes.

It is all too easy to imagine a scenario where using your credit card to pay your mortgage appears, at first sight, a sensible move. If you had been recently made redundant and had trouble paying the mortgage but you felt confident you would soon get a job, the logic of paying this months mortgage payment with a credit card may seem reasonable but it is a high risk strategy. The serious problems would develop later if you had not been able to find a job or increase your income.

Credit cards are very useful financial tools to use for short term credit but, and it is a big but, they are very bad to use for long term credit and if you cannot be sure you will have the money to repay the debt soon, the debt will just grow and grow.

It is not too hard to build up credit card debts where the monthly repayments are greater than your mortgage or rent if you spend regularly on your credit card while paying the minimum repayments each month.. This may be surprising to many but it can happen all too easily if you have a spending frame of mind and available credit. This is after all what we have been encouraged to do for years by every advertiser and credit card company.

Given a good credit rating and a lot of credit cards you may feel that using the credit cards to fund the mortgage repayments will get you over a temporary financial problem and that is possible if you are confident your financial circumstances will change for the better very soon. The result of doing this is that you are paying two lots of interest on the original debt and digging yourself an even bigger financial hole to get out of later.

There are warning signs when you are using your credit cards a lot.

1. If you find yourself using one credit card to make payments on another you should start to worry.
2. If you are paying less than the minimum payment on a different card each month to lessen the default problems, you should worry.
3. If the overall balance on your credit cards is increasing month after month, you should worry.
4. If you are paying your mortgage with a credit card you should definitely be worried.

Unless you have some cunning plan and are very financially astute as this is basically gambling that things will get better soon. If you find yourself in these types of financial difficulties you should discus your financial situation with one of the debt support organisations who will be happy to offer advice on the best ways of dealing with the problems.

They may be able to suggest alternative approaches to managing your financial difficulties that are less expensive and are more likely to enable you to stay in your home. Almost certainly credit cards are not the answer to paying your mortgage.

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)

Another year is heading to a close and, as always, this makes us look back to see what has occurred throughout the year and the story of the year is probably the same story as it was last year. The banks, bankers bonuses and the taxpayer support for the banks.

Unfortunately we have no say in the government backing the banks at a huge cost to us and to our children in the future. The banks didn’t deserve such support after their carelessness and stupidity and they should have been the ones living with little food, little heating and bailiffs banging on the door. Sadly, in this unfair world we live in, it is the taxpayer who has to pay to keep them in their comfortable lives.

Meanwhile thousands of people who were more careful are suffering at the hands of the banks as they charge them for everything they can think of, seemingly inventing new bank charges all the time and, no doubt, celebrating Christmas with the cheery thought that the Law has been used to get them out of the problem of their blatantly unfair bank charges. They know the charges are unfair, we know the charges are unfair and even the Supreme court ruling which upheld their case accepted that the charges were at best questionable on the judgement of what is fair. Unfortunately the wording of the law doesn’t allow the OFT to decide what is fair. You would quite reasonably assume that the Office of Fair Trading would be able to say what was fair or not but apparently they cannot.

So here we all are, swamped in personal debts, overwhelmed by government debt and all because the banks greedily kept buying worthless, so called, investments in pieces of paper they were told would be valuable which turned out to be worth very little. Now the banks are doing so well they want to pay big bonuses to their staff? Where is my bonus for keeping your business going and allowing you to have a job, Mr Banker? I don’t want a million pounds. Fifty quid would be a nice little treat thank you very much.

So if there is one message to come out of the last year or two it is this. Stop spending money you don’t have. It doesn’t matter if you are a banker, a government or the ordinary guy on the Clapham Omnibus, as they used to say, stop spending money you don’t have. Stop using credit cards and use cash to buy things, instead. If you don’t have the cash put off your purchase.

Happiness does not come from buying the latest gadget, though the advertisers would want you to think this was the case. Misery does come from excessive debts and financial difficulties. It is far better to sleep comfortably in your bed at night, knowing your bills are all paid, than to have a house full of gadgets and a head full of financial worries.

Contentment comes from within. You cannot buy it and nor can you buy happiness. Don’t be like the greedy and self righteous bankers who think the world owes them a living and they should be able to live on government benefits to keep them in the glorious luxury they think they deserve. They may have the outer shell of a human but a cold and wicked heart lies inside! Instead, be someone who cares about other people, share your happiness with your family and friends and be happy to live within your means.

If we were all to start using cash once again and live by the motto that, ‘When you run out of cash stop spending’, we will all be a lot more content within ourselves. We will eventually find ourselves to be more wealthy thanks to not paying enormous interest charges on everything we buy and even better…. We might get a few bankers losing their extremely well paid jobs if we don’t pay them all those billions in interest charges, credit cards fees, default charges and goodness only knows what other fees and charges they may decide to invent.

Lets begin a revolution, let’s start using real money again and when you run out of cash STOP SPENDING!

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)