"American Express is to slap a £20 annual "dormancy" fee on customers who don't use their Platinum cashback credit cards for a year.
The fee will be introduced immediately for new customers and from 1 October for existing cardholders to cover the administrative costs of running accounts left idle.
Amex is also reducing the top tier of cashback available to new borrowers from 1.5% to 1.25%, and increasing the amount of spending they need to do to earn cashback from £2,400 to £3,000 a year.
From 1 October existing customers will see Amex increase the level at which it pays out cashback from £12 to £25, meaning they will need to spend £4,250 to qualify for a payment compared with the current level of £2,500.
An Amex spokeswoman said the fee would be charged "once existing cardholders who haven't used [the account] for more than a year pass their card 'anniversary'".
Tom Allder, Amex's vice president UK lending, said he was confident the card was still the best on the market for high spenders, but changes had been needed to reduce costs.
"Rather than making changes across the board we have looked very closely at card member usage to ensure that we continue to offer the best proposition we can for our existing card members," he said.
"What this means is we have been able to safeguard the 1.5% top rate for existing customers while still offering a competitive on-going rate of 1.25% to new customers at a lower banding of £7,500."
Rivals Santander and Lloyds TSB levy a fee for low (or no) card use: the Santander Zero credit card and separate Santander credit card carry a £10 dormancy fee if they are unused for six months. Lloyds TSB charges a £35 annual fee regardless of credit card type. In 2007, it also wrote to low-usage cardholders to inform them of a £35 annual charge for inactive cards.
The letter was sent to all credit card customers who hadn't used their plastic for more than 12 months. Although many subsequently cancelled their cards, a spokeswoman said, customers who still have their cards and don't use them have since paid £70 in inactivity fees.
Borrowers should expect more dormancy fees to be introduced as credit card providers see their profits squeezed by the downturn, according to David Black of financial researcher Defaqto"
[ view entry ] ( 4 views ) | permalink |
( 3 / 276 )For those in debt it can be tempting to turn to a loan shark to try and rectify the situation but this is an option that you should avoid at all costs.
"Adam Fox went to a loan shark when he wanted £100 to buy a car stereo that was on special offer. He agreed to pay back the entire sum several days later, and was charged £20 interest.
Mr Fox, 26, of Stoke-on-Trent, had successfully borrowed money from a loan shark in the past, but on this occasion failed to pay the full amount owed on the due date — so the lender doubled the interest charge.
As the debt mounted, Mr Fox found it increasingly difficult to repay the growing amounts, and missed more payments — ending up being charged £100 interest every day. “Every time I didn’t pay, it cost me more and more,” he said. “There was no way that I could pay this, and the entire loan had reached £1,000. The loan shark said that he would break my legs if I didn’t pay up. This is the kind of thing that happens to people around here.”
Mr Fox, right, turned to A4e, a debt advice agency based in Stoke. Julie Cliffe, a debt adviser at the agency, said: “Mr Fox was on benefits at the time, and we found that there was additional income to which he was entitled.”
He also turned to family and friends to raise the money to repay the loan. “I’d never go to a loan shark again, never, ” he said.
Ms Cliffe said: “The worrying thing here is that the loan shark was not prosecuted and is most probably still trading.”
Where there are illegal loans, there are usually other debts too. “Mr Fox had faced eviction from his council-run accommodation on three occasions, but we have managed to help him,” Ms Cliffe said.
She said it was common to find borrowers who had been threatened with guns and physical violence.
Pressure among vulnerable groups to turn to loan sharks has been exacerbated by the growing difficulty of obtaining mainstream credit from high street banks. Many people have accumulated debts from before the recession, and now find they have few options.
Chris Peel, director of A4e, said: “We’re seeing more people these days. Clients come to us with priority debts such as rent arrears and council tax, but once we scratch the surface we find people have turned to illegal credit to pay off legal borrowings.
“As people’s loans become more complicated, they become less aware of what is legal and what is not, compounding the difficult situation they are in,” he said"
If you are in debt and would like help then why not consider an IVA. This is a legal and government approved method of resolving debt that avoids the consequences of bankruptcy. If you owe over £15,000 to three or more creditors and can't afford to meet the repayments then you may be eligible for an IVA.
[ view entry ] ( 2 views ) | permalink |
( 3 / 246 )Latest reports suggest that with an increase in home loans we could be seeing the end of the recession as far as the housing market is concerned.
"The number of loans approved for house purchases rose to a 17-month high in July, prompting fresh claims that the property market is emerging from recession.
A total of 38,181 mortgages were awarded by banks in July, up from 35,564 in June and the highest since February last year, British Bankers' Association (BBA) data showed. The typical loan size increased by 1% on the month to £139,700, with the total value of mortgages taken out for home purchase reaching £5.2bn in July, up 79.1% compared with the same month last year.
The BBA's figures add to recent data suggesting the property market and house prices may have bottomed out and begun to move forward again. Halifax and Nationwide reported 1%-plus gains in house prices last month, while the property website Rightmove said last week that bargain seekers had pushed its online traffic to record levels. Today, the Countrywide estate agency group said confidence was returning at its property auctions, with one in five homes selling above guide price.
Allan Monks, of JP Morgan Chase Bank, said: "This is the highest reading on mortgage approvals since February 2008 and extends the recent steady uptrend."
But the figures also revealed that debt-laden households are choosing to repay loans rather than take out new credit. Existing mortgage holders are repaying their loans faster, taking advantage of historically low interest rates.
The BBA said the amount of new spending on credit cards was down 9% on a year ago, personal loan demand had fallen 39% and bank overdrafts had edged back by 3.2% compared with last year.
British households repaid £200m of debt in July while at the same time increasing their bank deposits by £2.5bn, the association said.
In part, the figures reflect a new thriftiness after years of splurging on debt, but they also highlight difficulties in obtaining loans. Despite the record low Bank of England base rate, interest rates on personal loans and credit cards have risen substantially throughout the credit crunch. The typical rate on a personal loan has risen from 10.57% to 12.55% over the past year and lenders are turning away as many as half of all applicants.
Economists say the continued shortage of available finance, plus rising unemployment, could snuff out any recovery in the property market"
[ view entry ] ( 2 views ) | permalink |
( 3 / 236 )If you have ever been in debt then you may have felt no choice but to turn to a loan shark or similar. However this can often cause even more debt problems along with the pressure of making the repayments. For this reason it is thought that the Post Office could be a perfect way to provide an outlet for Credit Unions.
"Why are there so few options for those on benefits or low incomes to borrow money safely? It has simply not been a priority for the Government to come up with one.
Ministers made much of the Universal Banking Service they introduced in 2003 to allow benefits to be paid electronically. That may have increased access to no-frills bank accounts, but it has not provided any solution to the menace of the loan sharks. Loans to the poor are too risky, too time-consuming and too small-scale for the banks to bother with, and no one in authority has told them to mend their ways.
Despite warm words from politicians, community-based credit unions have failed to flourish. There are 690 of them in all, but they struggle to attract deposits, meaning that their ability to lend is limited. They also have a worryingly low profile. Only those already well plugged into community services would have even heard of their local credit union.
Legislation to make these organisations easier to join and more attractive to a wider range of customers is trundling its way through Parliament, but the reforms will not come into effect until the autumn at the earliest, and the crisis is now.
Contrast that with the US, where community development credit unions have developed quickly in the past decade to become the main community banking service for low and moderate-income Americans. They mobilise assets of $2.7 billion (£1.6 billion) a year and provide affordable credit to almost a million households. New low-cost loans are estimated to save members more than $300 million annually in interest charges from loan sharks.
The Government needs to do far more to promote credit unions here. The Post Office is looking for a new role and could easily offer credit unions the outlet that they desperately need. It is almost a perfect fit. The Post Office has a nationwide branch network but no products for low-income borrowers. Credit unions have an affordable product range but no branch network.
Local authorities could offer facilities and help with start-up costs for new credit unions in areas troubled by loan sharks"
[ view entry ] ( 2 views ) | permalink |
( 3 / 235 )For those that have been on a tracker mortgage their repayments are set to begin rising. Anyone who has been on this type of mortgage will have been fortunate enough to be paying possibly the lowest rates in history to date.
"Before the credit crisis, many borrowers took out tracker mortgages – loans whose interest rates rise and fall in line with the Bank of England's official rate – charging very small margins above Bank Rate. Some lucky ones were even charged a margin below Bank Rate. But all good things end. Many tracker deals last for just two years before the rate reverts to the lender's normal rate, usually called the standard variable rate (SVR), and a more realistic reflection of the lender's costs.
Many people who took advantage of the best short-term tracker deals just before the financial crisis began two years ago are about to see their interest rates revert to much higher SVRs.
Bank of Scotland, for example, offered a two-year tracker at Bank Rate minus 0.26 of a percentage point. Two years ago, Bank Rate stood at 5.75pc, so the rate that borrowers paid at the outset was 5.49pc. But now that the Bank of England has cut its rate to 0.5pc, the interest rate on the loan is 0.24pc, so a borrower with £150,000 outstanding on his mortgage is paying just £30 a month in interest.
The two-year introductory deal will expire on October 31, however, and the rate will revert to Bank of Scotland's SVR – currently 4.84pc. Borrowers' interest rates will rise by 4.6 percentage points – a colossal increase that means the interest bill on a £150,000 mortgage will be £605 a month.
On a typical repayment mortgage, the monthly payments will rise from £559 to £902, according to John Charcol, the mortgage broker.
Meanwhile Halifax, one of Britain's biggest mortgage companies, offered a two-year tracker at Bank Rate minus 0.51 of a percentage point, meaning the payable rate started at 5.24pc. Now that the official rate is 0.5pc, borrowers with this mortgage are paying no interest. But when this deal expires on November 30, the rate will revert to Halifax's SVR of 3.5pc – meaning monthly repayments of £438 for interest-only borrowers or £751 on a repayment mortgage, up from £501 now.
The lowest tracker rate available two years ago was Cheltenham & Gloucester's at 1.01 percentage points below Bank Rate. When this rate expires on September 30, the rate will revert to the bank's SVR of 2.5pc – the lowest on the market. Out of a total of 399 two-year tracker mortgages available in August 2007, 86 (or 22pc) were priced at Bank Rate or below, according to Moneyfacts, the data provider"
[ view entry ] ( 2 views ) | permalink |
( 3 / 236 )
Archives
