The Perils of UK Credit Cards: What You Need to Know

Credit cards can be a convenient tool for managing finances, but they come with significant risks, especially in the UK. Many people find themselves entangled in debt, facing high-interest rates, and navigating the complexities of credit scores. In this post, we’ll explore the potential pitfalls of using credit cards in the UK and offer some tips for managing them responsibly.

1. High-Interest Rates

One of the most significant dangers of credit cards is the high-interest rates that can apply to outstanding balances. In the UK, the average APR for credit cards can range from 18% to 25% or even higher. If you carry a balance month-to-month, the interest can accumulate quickly, leading to debt spirals that are hard to escape.

Tips:

- Always aim to pay your balance in full each month.

- If you can’t pay the full amount, consider transferring your balance to a card with a lower interest rate.

2. The Temptation to Overspend

Credit cards can create a false sense of financial security. It’s easy to swipe your card without considering the repercussions, leading to overspending and accumulating debt. This can be particularly dangerous during sales events or holiday seasons when spending temptations are high.

Tips:

- Set a budget and stick to it.

- Only use your credit card for planned purchases that you can afford to pay off immediately.

3. Impact on Credit Score

Your credit score is essential for securing loans and mortgages, and credit cards can impact this score significantly. Missing payments, maxing out your credit limit, or applying for multiple cards can all lead to a lower credit score, making it harder to secure future credit.

Tips:

- Monitor your credit score regularly.

- Set up alerts for payment due dates to avoid missed payments.

4. Fees and Charges

Many credit cards come with various fees, including annual fees, late payment fees, and foreign transaction fees. These additional costs can add up and lead to financial strain. Understanding the terms and conditions of your credit card is crucial to avoiding unnecessary fees.

Tips:

- Read the fine print before signing up for a card.

- Look for cards with no annual fees or low-interest options.

5. Identity Theft and Fraud

Credit cards can also be vulnerable to fraud and identity theft. Scammers use various tactics to steal credit card information, which can lead to unauthorized charges and long processes to resolve disputes.

Tips:

- Regularly check your statements for suspicious activity.

- Use two-factor authentication when possible for added security.

Conclusion

While credit cards can offer benefits like rewards and convenience, the potential perils are significant. By understanding the risks and implementing responsible practices, you can navigate the world of credit cards more safely. Always remember: financial responsibility is key to avoiding the pitfalls that come with credit card use.

### Suggested Hashtags

#CreditCardPerils #UKFinance #DebtAwareness #FinancialLiteracy #CreditScoreTips #SmartSpending #MoneyManagement

- "UK credit card risks"

- "how to avoid credit card debt UK"

- "impact of credit cards on credit score"

- "best practices for using credit cards"

- "credit card fraud prevention UK"

By staying informed and proactive, you can enjoy the benefits of credit cards without falling into their traps. Happy spending!

Daytime TV and Debt

I was working from home recently and had the television switched on in the background. I don't watch daytime television often, but when I do there is something that really annoys me. Its the adverts for loan consolidation. They often go along the lines of consolidate your loans and agree one simple repayment. The problem is that often people do not see beyond the low payment, they just see that they are paying less each month. So whats the catch if your paying less each month. Well the answer is simple, the reason you are paying less is because the loan is over a longer time period. Often the rate of interest is no better, its often worse. So the end result is that you pay more over the longer term. 

What makes this even more appalling is that the adverts are shown during the day targeting the poorest in society, the unemployed. The other thing to be aware of are the number of Debt companies that offer Debt management. Your in arrears and a debt collection company is writing letters to you. So when you see an offer for debt management, during that period when you are vulnerable and stressed, the attraction of debt management, where someone looks after your debts and deals with your creditors is incredible. 

 Well before you take up this offer, bear in mind they are out to make a profit from you. If you go for the debt management option, you will often have to pay an upfront fee, often a few hundred pounds. The company then deals with your creditors and negotiate a monthly payment plan. You then pay a fixed fee to the debt management company who then process your payment to the lender. Sounds great in principle, but the debt management companies charge monthly fees. So for example, you could arrange to pay the debt company £50 per month. A nice, easy manageable figure, but the debt company may charge a flat fee of around £25 every month. So actually your creditor gets only £25. 

 I have worked as a doorstep collector and have seen loads of cases such as above. One company I came across would open a bank account for you. On the day your money came into the account they took their fee, took money to pay the creditor and left you with the balance. The fee for the bank account was £30 per month. There are ways around this. There are some organisations such as Payplan that will manage your loan for free. They do this because they are funded by the credit industry. They will assign a caseworker who will speak to your creditors and arrange a plan, then you pay Payplan and each month they pay the company. The cost to you is zero. You just pay off the loan. Lastly, I should mention debt collection agencies. These are companies appointed by your creditor to collect the debt. The interesting thing here is that by the time a debt goes to debt collection, the interest is normally frozen. 

So at this point, the debt collection company is looking to clear the debt as quickly as possible. They may offer a quick settlement figure, but for most, quick settlement is not an option, so they will offer an installment plan. Again, every penny goes towards clearing the debt as you are not paying fees. This can work to your advantage, as you are effectively paying off debt at 0% interest. Beware though that a settlement will knock some of the debt off (10 per cent is common) but it wont clear your credit file as the file will be marked as settled and not satisfied. If you are paying through a debt collection agency, you should aim to repay the debt as quickly as possible in order to restore your credit rating. 

 Don't think you can go on paying £5 a month on a £10K loan as your account will be reviewed every year and if your circumstances have improved, they will expect higher repayments. Whilst paying off more of a debt is not a bad thing, you need to ensure the repayments are possible. If you can't the worse thing you can do is say yes to a higher installment figure as you are not going to be able to sustain the higher repayments and will then start falling behind leaving yourself open to possible legal option. Finally, whatever your debt circumstances, there is always a way out. However you must be proactive and keep to any repayment plan. Seek informal advice via the forum that can be found here or consult a qualified debt adviser. Whatever you do, don't ignore letters, take positive action and I dont mean throwing them in a bin. Take on your debts and control them, not let them control you.

#debt #paydayloans

Child Benefit - Extra Cash for Parents

Are you getting the money you should be getting for your children.

If you are in the United Kingdom do you qualify for child benefit?

Any person responsible for bringing up a child can apply for Child Benefit, provided the child is  

 1.     Under 16 

 2.     Or Under 20 if they stay in approved education or training. 

 Child benefit can only be paid to one person per child.   

 This means that two persons can receive child benefit for two children, but two persons cannot claim for the same child. 

 You can't get Child Benefit if your child: 

 1.   Is in hospital or residential care and will be there longer than 12 weeks - unless you're still spending money on the child's needs 

 2.     Is 16 or over, has left full time education or training and works more than 24 hours a week 

 3.    Has been in prison or custody during the last 8 weeks has been looked after by a local authority for the last 8 weeks. 

 4.     Is getting any of the following 

          Income-based Jobseeker's Allowance 

          Universal Credit 

          Tax credits 

          Income Support 

          Employment and Support Allowance 

 5.     Is married or in a civil partnership - unless they're either not living with their partner or their partner is in full-time education or training. 

If your child ceases to attend college, you must notify HMRC straight away.  If you don't it is highly likely that someone else will which could mean that you will be investigated for child benefit fraud. 

You sometimes have to take the lead and contact the department yourself.

The £60,000 threshold

If you earn over £60,000 per year then you may be required to pay back the child benefit.  However if there is a child maintenance case, you need to claim the child benefit.  So you can select the option to be a qualifying case, but opt to not receive any child maintenance.

#HMRC #childbenefit #ukbenefits

Five practical Things You Can Do Today to Help Your Finances if made redundent

 This isnt a quick fix guide.  its a quick ideas list of five things you can do today if you are about to lose your job..  Send me more ideas if you have them!

1    If you pay child maintenance via the Child Maintenance Service, ring them straight away and ask to be put on a zero assessment.  

2   If you need to register for Universal Credit click here.

3.   Look at all your direct debits and see what can be changed.  For example, have you been paying too much money for utilities.  Consider swopping energy provider.

4    Can you pay your credit card early.  Many credit cards calculate interest on a day to day basic.  Therefore if you are unable to pay the card in full, you should try to pay early so that the accruing interest will accrue on a lower balance.

5   Can you swop to a different bank?  A different bank may charge less interest on overdrafts?  It may even offer a switching incentive.   


#unemployed #moneyworries #debt #moneyhelp