Do you already have a credit card or perhaps even more than one? Well if so, new rules are being drawn up by the UK government that may affect you if you’re in the UK.

In a swathe of wide-ranging measures announced by the government on 27 October, credit and store card companies may soon be forced to give consumers a fairer deal.

Consumer minister, Kevin Brennan has raised concerns about how long it takes consumers to repay their credit and store card debts and says it can take as much as 40 years to pay off a credit card if only the minimum repayment set by the provider is met.

He said: “It is up to consumers what they pay back but I think most consumers are quite shocked when you actually tell them that if you only pay the minimum repayment it could take you up 40 years, much longer than a mortgage to pay off the debt on your credit card.”
“While they [consumers] won’t welcome the idea of paying a bit more back every month, I think that once people realise the facts and see what it means in real terms to pay a little more back, many consumers will feel it is the right thing to do to.”

So what are the proposals?

In summary, there are four main strains:

Changing the rules that dictate the order in which debts on a credit card are paid off
Raising the minimum monthly repayment level so people pay off their debt faster
Banning the practice of increasing credit limits without prior consent
Placing restrictions on increasing the interest rate on existing debt

Changing the order in which card debt is paid off
In its credit consultation paper, the government is proposing to change the rules that set the order in which debts built up on a credit card are paid off.
As it stands, most credit card companies make customers pay off the cheapest debt first. So, if you have withdrawn cash from your credit card – which is usually charged at a higher rate than making a transaction on the card – then the card provider would usually use your payments to pay this debt off last.
The government is now seeking to put this right and is considering rules that would mean the most expensive debt is paid off first, which is ultimately in the best interest of the borrower.

Raising the minimum monthly repayment level
According to the government, too many people are just repaying the minimum amount set by credit providers, which in turn means borrowers can be saddled with debt for a long time. The government wants to see people get out of debt quicker and to aid this is considering getting lenders to offer two repayment options.
This could take the form of a second higher minimum monthly payment so debt gets paid off more quickly, but could possibly still allow borrowers to drop to a lesser minimum amount if they were having a financially tough month.

Banning the practice of increasing credit limits without prior consent
Credit card companies can and do increase credit card limits without first getting the consent from the card holder, essentially taking away the control you have over your card debt.
To put a stop to this, there are a few options open to the government, one of which could see it ban credit card providers from giving you a higher limit unless you asked for it. The government could also make the credit card company send you a separate letter when they increase your limit, and force them to give you a clear way of cancelling it.

Placing restrictions on increasing the interest rate on existing debt
From time to time, credit card companies will decide their customers or a group of them need to start paying a different interest rate on their credit cards. The government is worried that credit card companies are increasing interest rates as an easy way to stay in profit during the recession. It is also of the opinion that card companies have not been very good at explaining to customers why they suddenly have to pay increased interest charges on their credit cards.
As a result, it could stipulate that credit card companies only increase their interest rates by a certain amount or even stop them from raising interest rates on the debt consumers already have.

Overall, the government wants credit card companies to be more helpful and one way it thinks they can do that is by giving consumers an annual summary of how they’re doing with their credit card debt. This summary could then allow you work out how to avoid paying too much interest and help you compare your card with other ones to see if you’re getting the best deal.

What should I do now?
If this issue has got you fired up, then UK comparison site Confused.com want to know about it. Should credit card providers be forced to be fairer to consumers? Have you been stung by unexpected increases in interest rate charges? Or are you against the government proposals? Whatever your thoughts on this consultation, let the Confused.com team know. Email your comments to the editor at: sharon.flaherty@confused.com.

For further information on the consultation visit: www.bis.gov.uk/creditconsultation

Confused.com offer credit card comparison services, along with mortgage and saving comparison services.

Ends

With the alarming rise in unemployment as a consequence of the economically difficult times being faced, the prevalence of pay and hour cuts are becoming analogous to the incidences of redundancy amongst the population. Losing an income can place a significant financial strain upon a household, so what strategies can be utilised to financially readjust to these new circumstances?

1. All Chips In: Re-Evaluate Your Income

One of the most crucial parts of facing the challenge of redundancy is financially treading water until the regular money in lost income can be replaced. In looking at how much money enters your household each week or month, you will be more able to attribute priority to expenditures. It is important to remember that in identifying how much money enters the house, there is no requirement to look solely at wages earned from formal employment: for example, if eligible, some families can claim benefits to bolster their income.

2. Big Fish: Identify Key Expenditures

There are always expenditures that are vital to be outlaid in order to maintain any household and it is important that these take precedence over more minor outflows. Once the total income of a home has been established, a list of all outgoings can be established. The most crucial of household payments to be met normally include mortgage or rent payments, taxes in various capacities, bills for utilities such as electricity and gas, and money allocated for food.

3. Small Fry: Identify All Other Outgoings

Once the major expenditures that are necessary to be met in order to maintain the running of a household have been identified, the next step is undertake is to list all other outgoings. Many individuals typically use bank statements from previous months to recognise all other expenditures. In identifying where money is leaving the house, it is possible to make concessions or eliminate payments in order to readjust to the new figure in income. For instance, challenge yourself with a mantra of “was that a necessary item/could I have bought it cheaper elsewhere?” when attempting to justify expenditures.

4. Befriend Your Creditors

This is not to say that adding your credit card company to your list of Facebook friends is wise! With the accessibility of personal credit it is likely that some of the expenditures identified are likely to be repayments towards debts. In the instance of not being able to make full payments where a company requires, it is vitally important to communicate with your creditors as soon as possible to alert them to your altered circumstances. Typically, many creditors will be willing to negotiate repayment, providing you make a concerted and determined effort in showing that you are keen to make as large a payment towards your debt as you are possibly able.

5. Laurels Are Not Resting Aids

Surviving indefinitely on a reduced income is not always financially possible and so it is vital to begin searching for a new job immediately following redundancy. Many individuals view being laid off as a slight against their personal ability, however in this economy it is more likely for workers to be made redundant because the business is unable to sustain wages, rather than as a result of the worker’s ability. It is important to practice resilience and to consider every job as a possible source of income as opposed to a career choice since the job market has a lot of recovery required before careers can be facilitated again however the employment market is already beginning to show signs of recovery.

This article was provided by David Brown – a freelance writer with extensive experience in the area of debt information and currently writing for the debt advice website IVA.net.

Whenever you embark on a major home improvement project, ranging from a new bathroom to a building extension, one key issue you will have to address at the outset is that of how to manage the work involved.

What is involved
There are a number of things that need to be done:
Plan the work carefully beforehand to make sure that what is eventually completed reflects your prior vision in its entirety
Arrange for all supplies to arrive on site at a time suitable so that those working are not held up by lack of any materials
Make sure the supplies that are bought and paid for are of the right quality and good value
Ensure you have the best tradespeople to do the job, at the right price
Arrange the order of the work so that different trades can carry out individual stage of the work in the right order
Make sure they all understand exactly what you want done, how it must be done and to what standard
Make sure that everyone turns up when they say they will, does the work they say they will, to the standards you expect
Just as an exercise, work out exactly what the stages are in building a new bathroom, from start to finish.
As you can see, this involves a difficult set of interlocking tasks. It takes a lot of time, it is both intellectually and emotionally demanding and requires someone to have a reasonable knowledge – or be willing to learn – about the building process involved in their particular project.
Who might manage this work? There are a number of options:

Use an architect
If you are looking at a major piece of construction, involving a lot of technical detail, you may need an architect. His or her work may involve not only coming up a plan that meets your desired objective, but piloting it through the local authority’s planning stages, preparing a building contract, hiring a builder and then overseeing the work on the site itself right to the end.
The advantage of this is that it should, in theory, mean a professional is taking care of everything for you – in return for a fee. Moreover, most good architects will have a list of good builders they can call on who are able to out their designs into practice.
Also, they should, using their experience, not only be able to price any labour and materials needed far more accurately than you could, but obtain the best rates for them too. So, in theory, you save money too.

How much does this cost?
For a typical loft conversion, think in terms of 12% to 15% of the overall build cost
For a large extension, the cost is more likely to be about 10% to 12%
A complete home might cost about 8% to 12%, depending on the difficulties involved in the build
Can you get an architect to do it for less? Yes: you just ask them to sort out the drawings and the planning application and then either manage the build yourself or bring in the contractor yourself.
If so, you are looking at paying about half of the above amount.

Hire a main contractor
As we have seen, the process of ensuring all trades come in at different times, some of them at staggered intervals, throughout a building project, can be complicated and time-consuming. Getting it wrong can be costly and lead to long delays.
You can hire a main contractor who will take care of all of it, bringing in each sub-contractor as and when he needs them. The advantage is that everything is taken care of for you. The disadvantage is that you are relinquishing control of the project to someone else, who may not have the same vision as you do.
There is also the issue of cost. A main contractor will expect to make money from:
The wage you pay him
A proportion of the labour costs
A proportion of the supplies that he obtains on your behalf
The overall cost can be between 10% and 15% of what the build cost might involve if you were handling everything yourself. This would be in addition to the architect’s fees, assuming an architect were involved right down to the final stages of the project.
Of course, the contractor can still obtain better prices for materials and also for labour than you might be able to find, so you might never see the savings if you did it yourself. Are there cheaper ways?
Yes, you can still use a main contractor but agree that he is responsible only for the labour and build management while you buy the materials. But you would have to ensure that all materials are available on the site as and when they are needed, or risk fracturing your relationship with the main contractor. You would expect to cut between 30 and 40% of the total contractor’s cost in this way.

Do it all yourself
As we have seen, there are many stages involved in the building or home improvement process. You are likely to have to spend several hours a day on managing each stage.
You will also have to be on the site each day for some of the time to address daily concerns as they arise. If you think you can do that, you should expect to save anything up to 25% of the total cost of the project, although 15% is more realistic.
This depends on how good you are at negotiating daily rates with individual tradespeople and what kind of prices you can get for the materials you are buying. The danger is that of getting it wrong, for example not managing costs properly: in that case the project can end up costing more than if you brought in the professionals.

Fast-forward to now, however, and it’s a different story. Home improvement retailer Kingfisher, which owns B&Q, saw same-store sales fall by 1.1% at the end of last year . This followed sales slumps of 8% and 2.7% respectively during the first two quarters of 2006. Changing Rooms has, of course, long since departed from our screens. And as anyone who still watches the adverts on TV will testify, there’s hardly a Ronseal Quick-Drying Woodstain or Black & Decker power tools ad in sight.

This gloomy picture for the home improvement market was compounded with a report by market analyst Verdict Research revealing that the home improvement and gardening sector is suffering a sales drop for the second year running. The report concluded that the home improvement market’s performance over the past two years had been “dismal”.

Looking to make some improvements to your home? Compare rates on unsecured personal loans
Forget DIY, it’s all about DFY
It seems, therefore, that the British love-affair with DIY is well and truly over. The report found that while for many years getting in outside help to perform improvements tasks in the home was seen as a badge of shame by many homeowners, more and more are now ditching opting for DFY – Done For You – improvements instead.
Kingfisher share price chart
The Polish plumber phenomenon
According to the report’s author, Nigel Gladding, one of the major reasons for the decline of DIY has been the arrival in the UK of large numbers of tradesmen from Eastern Europe.
He explained that many Eastern European tradesmen were not only highly skilled, but, crucially, were prepared to work for less than their British counterparts.
“The influx of skilled tradesmen from the new EU states… has reduced the cost of home improvement projects,” he said. “It has made ‘Done For You’ a much more affordable option.”
Sean Gardner, chief executive of financial website MoneyExpert.com, praised the positive impact of Polish workers in particular in making paid-for home improvements more affordable.
“Polish builders are already building a strong reputation in the capital for producing excellent work. It’s certainly increased competition, which can only benefit consumers,” he said.
A recent MoneyExpert study found that more than a quarter-of-a-million Londoners have employed Poles to carry out work on their homes in the past 12 months, adding that this figure was almost certain to rise in 2009.

The RBA has put rates up now on the belief that the financial crisis is behind us, and it has to return to its established role of controlling inflation.

That this decision was likely was flagged by the speech by Anthony Richards last week, which implied that the RBA, having ignored the house price bubble created by private credit growth in the preceding two decades, was worried about the renewal of the bubble initiated by the Government’s First Home Vendors Boost (I refuse to call it by its official name, since the money clearly went to the vendors, while the buyers copped only higher prices).

Needless to say I am all for trying to contain the house price bubble, which I regard as a disguised Ponzi scheme that has sucked Australian households into unsustainable debt levels. It is quite possible that the increase in interest rates (which is sure to be fully passed on by lenders and will add $20 a week to the servicing costs of a now commonplace $400,000 home loan), combined with the phasing out of the Vendors Boost, will be enough to prick the bubble–especially if it is followed by another rise next month.

But the RBA is doing this in the belief that the economy will return to normal after the recent mild recession–normal meaning growing at about 3% per annum in real terms, and faster than that as it rebounds from the recession.

Unfortunately “normal” in our post-War experience has also involved a return to a rising private debt to GDP ratio. Every recession has involved a fall in debt-driven demand, and every recovery has involved a return to debt rising faster than income. As the global financial crisis has made many people realise, this is simply a formula for avoiding a crisis now by having a bigger one in the future.

I doubt that the RBA appreciates this even today. It is still mired in a neoclassical way of thinking about the economy, which myopically ignores the impact of debt-driven demand on the economy. This is why it can put up rates now in the belief that this will merely fine tune the economy’s performance–reducing the likelihood of inflation in the future.

I think it is likely that the RBA will achieve far more than it intends. The last time the RBA put rates up to attempt to control an asset price bubble that was already out of hand was back in 1989. That exacerbated the economic downturn that was already in train as the debt bubble of the 1980s started to collapse. I expect the outcome of this rate rise will be similar: a downturn that is already in train as a debt bubble bursts will be made worse by this increase in rates at a time of greatly heightened financial fragility.

The problem this time is I believe far worse than 1990. Then the household sector had a relatively low level of debt–the mortgage debt to GDP ratio was a comparatively trivial 18 percent, compared to its now record level of 87.5%. It was therefore possible for the financial sector to lend willy-nilly to households, something neoclassical economists facilitated by their enthusiastic deregulation of the financial sector.

Who is there to lend to today? All sectors of the economy except the government are carrying record levels of debt. Thus while the Vendors Boost and other enticements encouraged some additional borrowing by the already massively leveraged household sector–and gave us a household debt to GDP ratio that now exceeds America’s–I simply can’t imagine who (apart from the government) the financial sector can now sell debt to.

As a result, I doubt that we will see any sustained acceleration in the debt to GDP ratio, with the consequence that the debt-financed component of aggregate demand will be anaemic at best. Since that has been the major source of growth in aggregate demand for many years now, I expect that economic growth will be substantially less than the RBA anticipates.

If so, just as it killed a dragon that wasn’t there by its inflation-fighting rate rises up until March of 2008, it may be taming a lion that is sound asleep with its rate rises now. If economic growth does in fact stay well below levels that reduce unemployment in the coming two years, then there will be very good grounds for revoking the independence that the RBA has had in setting monetary policy. We may as well hand it back to the politicians, if the alternative is to leave it with neoclassical economists who don’t understand the dynamics of our credit-driven economy.

Ref: http://www.debtdeflation.com/blogs/

Source:www.moneystand.co.uk

It’s time for some more debt tips! If you’re at the stage when you know you have to face up to your debt but still find the idea a bit daunting, here’s my FIVE most important Steps:

Step One:

There has to be a lightening strike when you are honest with yourself as to exactly how much trouble you are in. Sit down take a deep breath and open all the bills that are stashed away unopened because you have never dared. Write down a list and work out exactly what you owe and to whom. Read that list and cry, grieve, if you need to, and then decide that you are going to sort it.

Step Two:

Set two is tell you loved ones exactly what a mess you are in. They may be angry, shocked or disapointed to start but they will give you the emotional support you need. Once you’ve told your loved ones you will feel better – a problem shared is a problem halved as they say. Your freinds and family won’t just give you emotional support, they’ll also encorage you and help you in other ways – you just have to ask for their support.

Step Three:

Cut up the plastic and stop spending. I don’t care how hard it is or how much you ‘need’ to buy something – this is about tough love here. No excuses. Start riding your bike to work, walk the kids to school, make lunch before you leave the house, use up your tinned food and freezer food that’s just lying around instead of getting more groceries, change your mobile phone plan, anything you haven’t used for a year – put it on ebay, cancel your gym membership and get fit the old fashioned way – there are no excuses here. You CAN stop spending and you CAN make changes right now to reduce your monthly, weekly and daily budget. It’s the only way things will get better, trust me.

Step Four:

Ring a not for debt advice charity, debt advice line, or debt agency – just make sure it’s free to call first. They will not take a fee but will help you go through the options of how to go forward they will contact your creditors and will help you with a budget suitable for you circumstances. Be cautious if they sound like they are trying to sell you a debt solution – make it clear you are calling for a free intial chat about your options and are calling multiple services to get the best advice and will have to discuss it with your family/partner/friends before you choose what road to go down. When you speak to them do not feel embarrassed – they speak to thousands of people around the UK who are having some money problems.

Step Five:

Remember you are not the only person in this situation. It’s nothing to be ashamed of and now you have taken the first steps your life will seem allot easier with a weight lifted from your shoulders. Take a moment to yourself to congratulate yourself that you’re on your way. Positivity and will power is key to changing your financial situation.

]]>