'Ditch your charity card and donate your cashback!'
October 16, 2007 at 10:53 am
Back in July, we gave you a round-up of the best charity cards on the market. Charity, or “affinity”, cards are certainly popular and the better ones raise substantial sums of money for good causes. And yet…with a wide range of cards offering cashback, you could benefit your favourite organisation even more by directly donating cashback “earnings” to the charity.
The most generous charity credit cards donate more than 1% of your spend to the charity, as well as making a one-off donation, typically £20, when the card is first issued. A card like the Halifax NSPCC Charity Card is more typical, however, with 0.25% of all purchases donated by Halifax to NSPCC. So, if you spend £3000 on your card in the first twelve months, the NSPCC will receive a funding boost of £35 (the initial £20 donation plus £15). It hasn’t cost you anything, but it’s not a huge amount of money all the same.
- Currently Abbey is offering up to £50 cashback with its credit card. You earn 5% cashback on the first £1,000 spent on supermarket shopping before the end of January 2008.
- A Capital One cashback card lets you earn 4% cashback on purchases in the first 3 months, dropping to 1% on purchases thereafter.
[http://www.barclaycard.co.uk/products/apply/platinum.html?TC=AAHFA10918 Barclaycard Platinum Cashback Credit Card offers 2% cashback on petrol and supermarket shopping, and 0.5% cashback on any other money spent.
A further advantage of donating cashback is that you can deal directly with the charity, and sign up for Gift Aid, so that the organisation can reclaim this tax to increase the value of a donation. Currently, hardly any credit cards automatically add Gift Aid on top of the percentage donation from your spend. The “donate as you spend” Hope for Children Mastercard is one of the few that do.
Ultimately, if you think you wouldn’t get round to making a donation directly, then a charity credit card may be an effective way of giving. Affiliating with a bank does also help raise the profile of a charity – something which in itself often helps the charity by boosting awareness and financial support. However, if you’re disciplined enough to do it, saving your cashback and donating it directly could do a lot more than a run-of-the-mill charity card.
'New warning over hotel check-ins'
October 12, 2007 at 11:14 am
A new problem with using credit cards for hotel check-ins has been highlighted in recent weeks. There is a chance that you could go over your credit limit without knowing – simply because you checked in at a hotel.
It is a common practice at hotels, but many people do not even realise what is happening to their credit card at check-in. When your card is initially swiped, what is really happening is that a sum is reserved from your account to cover not only the full cost of your stay but an estimate of any extras. So, for example, supposing you are agreeing to stay in a hotel room for £100 a night, it is not uncommon for the hotel to reserve almost double that price on your account in order to make sure you have enough funds for extras such as meals, in-room movies, and so on. This earmarked total sum is unavailable for your use during your stay and the earmark is only lifted when you finally check out and your hotel processes your final bill.
This process of earmarking in itself seems very dubious as it seems to be another way of claiming a deposit, often without the customer knowing. It could also run you into serious credit troubles.
Picture this scenario: a customer might check in to one hotel, where their credit card will be swiped and the funds earmarked. Before ever incurring a charge the customer cancels the booking and checks in to another hotel where the credit card is once again swiped. The card fails because there is not enough credit left as each hotel had pre-authorised a certain sum to cover an estimated cost of the stay, each sum being earmarked and therefore reducing the available credit.
Even though the process of hotel pre-authorisation is in much dispute, APACS, the body that regulates credit cards, confirmed that it was a standard practice, with hotels often pre-authorising an unrealistic amount before the stay. This is usually not an issue after check-out has occurred, but of course it can seriously disable your finances before check-out and therefore can be a serious problem. Not only are the pre-authorisation charges often unreasonable but the customer is not informed that this is happening.
Sandra Quinn of APACS insists that hotel customers should stay aware of what is happening to their accounts. It is important for everyone to make sure that they are asked to sign or authorise an amount before any sum on the account is earmarked.
'Credit card cheques – convenience at a price'
October 9, 2007 at 11:03 am
Have you received credit card cheques from your card provider recently? If you have, you are certainly not alone. Thousands of UK consumers are being tempted to cash in this type of cheque without being fully aware of the costly consequences, according to Which?, the consumer champion.
Credit card cheques allow you to make payments using your credit card account in situations where cards themselves are not accepted. They sound like a good idea in theory, but they are expensive. The Office of Fair Trading (OFT) declared in April 2006 that “credit card default charges … have generally been set at a significantly higher level than is legally fair.” The maximum penalty fee was set at £12, and thousands of consumers have subsequently, successfully reclaimed card charges. Meanwhile, according to consumer organisation Which?, credit card providers have been trying to rack up the cost of their other services to try and offset the sudden loss of income.
Which? Money Editor Martyn Hocking said, “Credit card providers seem to be resorting to a raft of ingenious methods to recoup lost revenue following the OFT crackdown on penalty fees.” This includes credit card cheques.
Although the terms and conditions must be clearly stated by the credit card company, industry specialists are concerned about the volume of unsolicited cheques which are currently being sent out to customers, who are often ignorant about this form of payment. Many customers don’t realise that these cheques attract higher interest rates than a “normal” credit card transaction. Because credit card cheques are not sent out in a book, but singly or as a sheet with multiple cheques, they can be harder to keep track of – and therefore an easy target for fraudsters.
'Even tiny missed payments can put you at risk from obtaining credit'
October 5, 2007 at 2:58 pm
We all know how important it is to have a good credit rating as we often need to rely on it when we want to get a mobile contract, credit card or make a big purchase. However, worrying new reports suggest that it is in fact surprisingly easy to get a low rating just because of a few mishaps. Indeed, even missing a few payments on your mobile phone contract can jeopardise your chances of obtaining credit in future, for instance when buying a home or getting a loan.
Apparently the increasing difficulties of maintaining a high rating are due to lenders putting tougher measures in place in order to spot rogue borrowers. More and more companies such as mortgage lenders, banks and suppliers of credit cards are now doing thorough checks on new customers using credit reference agencies which hold customer details on record. Even minor problems on a record could make a company wary of lending you money.
Spokesman Neil Munroe from credit reference agency Equifax explains that there is so much evidence to show that lenders now require more details of your credit history before they can process an application. He says that “minor misdemeanours are becoming more relevant, especially for first-time buyers. A consumer’s mobile phone credit history would previously have been seen as secondary information. Now it is being scrutinised.”
The fact mobile phone payments could be taken into account is the number of people who take mobile phones lightly. Not many realise that they could be harming their future when they fail to make a payment. It has in fact been estimated that up to 10% of the 24.4 million contract mobile phone users pay their bills late or do not pay at all. Should someone’s attitude to a mobile phone really influence their ability to keep up much more serious mortgage payments?
One thing is clear: the more chance there is for your credit rating to be lowered because of things like this, the more likely it is for you to suffer unduly as a result. Indeed, there have been many cases where a credit rating has been lowered as a result of a fault on the part of companies. For example, say you have a mobile phone contract and you are overcharged one month and do not pay – even if the dispute is resolved, your details could have long been passed on into the bad books for credit. This is clearly unfair.
Though everyone would accept that lenders must know if the customer is reliable, there is some line to be drawn to check this reliability. Perhaps by weeding out the rogue borrowers, companies are also mistakenly rejecting those who would have perfectly kept up with any repayments.
'Number of people seeking credit card debt advice soars'
October 2, 2007 at 9:43 am
The Citizen’s Advice Bureau has said that the majority of requests for advice it receives are from individuals struggling with personal debt. In the year up until June, the charity handled 1.7 million cases, an increase of 20% on the previous year. This equates to roughly 6,600 queries every working day. One in three of the queries the organisation receives is regarding debt, which replaces welfare as the most common reason for contacting the CAB. The volume is so great that the organisation is running out of trained debt advisors and is struggling to recruit enough new personnel to work in the area.
Chief Executive of Citizen’s Advice, David Harker, commented: “These figures are worrying evidence that while many have enjoyed the benefits of the credit boom, a large and growing number of people continue to pay the price, becoming overwhelmed by serious debt that can have a devastating impact on their lives.”
The demographic most commonly affected by debt problems are young families. Having taken out a mortgage at what could prove to be the top of the house price cycle, and with interest rates going up, many young couples have taken out personal loans or credit cards in order to cover their costs. Other affected groups include over 65’s who spend on credit cards to supplement their retirement income, and young women who live on their own. These groups have seen growing numbers of people declared bankrupt, up from 28,000 in 2005 to 107,000 last year.
The Consumer Credit Counselling Service has noted that, whereas traditionally, bankruptcy usually stems from a significant change in individual’s personal circumstances, such as divorce, family death or unemployment, its chief cause now seems to be simply overspending.
The growth in the credit industry started in the 1990s. As the property market started making record gains (and continued to do so until recently), lenders were happy to issue money with property as the collateral. With the arrival of American specialist credit card firms such as MBNA, competition increased in the credit card market, which had previously been dominated by retail banks. Providers offered customers lots of cheap money, which people happily snapped up, and spent on anything from home improvements to holidays and cars, as well as day-to-day living expenses.
The result is record levels of debt across the UK, currently £1,354 billion. This has caused some concern that economic growth is underpinned more by growth of debt than by growth of output. Shadow Secretary of State for Work and Pensions, Philip Hammond commented on the current situation, saying; “An economy built on borrowed money is built on borrowed time.”
There will be concerns now as to how the ‘credit crunch’ which has rocked financial markets will filter through to consumers. As banks become concerned about their exposure to debt, and make the cost of borrowing more expensive, consumers should not be surprised to see these costs being transferred to them. Mortgage interest rates are likely to go up, particularly for customers of sub-prime lenders such as Northern Rock, and interest rates on credit cards are being revised as banks become concerned about the increasing number of people defaulting.
