David Rodger, managing director of the national charity the Debt Advice Foundation, said that an advantage to the product is that it stops people from going into the red and acquiring interest because they can only spend what is on the card.

“The customer gets all of the advantages of using a credit card, without the risk or temptation of spending more money than they have,” he said.

These cards can still be used in the same way as a credit card, enabling users to pay for things over the phone or online, he explained.

However, Mr Rodger concluded that there is one issue in that consumer will still have to limit themselves to only loading onto the card what they can afford.

Recent statistics from unbiased.co.uk stated that credit card debt in the UK currently stands at £54 billion, with the average person needing to use their first 50 days’ worth of earnings just to pay off the interest they will accumulate.

source: Moneynews.co.uk

According to research from the fourth annual Scottish Widows Savings and Investment Report, adult children are continuing to ‘sap’ their parents’ savings and investments and while the average amount being handed out has increased significantly, the number of parents able to give has fallen.  Almost half (47%) of parents with children over 16 have given or loaned money to their adult children or grandchildren; this is a drop of 9% from 2009, but the average ‘Savings Sap’ is £13,660 (up from £11,800 last year), revealing those parents able to give are being forced to give more as their children struggle. The overall saving sap fund has decreased to over £64.3billion, from £72.5 billion last year.

Many young adults are forced to borrow from their parents just to get by, over a third (35%) are digging into their parents pockets to fund day to day spending and living expenses, compared to nearly a quarter last year (24%) Over a third (38%) needed the parental handouts to pay off debt and 34% needed the cash for a house purchase. Whilst one in ten of those using mum and dad’s (or grandparents) money are doing so in order to train for a new career as many people have had to reassess their career options.

Iain McGowan, savings expert at Scottish Widows comments: “”Our “savings sap” research highlights the “double whammy” of the recession where children are relying on their parents. On the one hand, “generation Y” is looking ever more to its parents for help as it struggles to get jobs, credit and mortgages – and to clear debt. At the same time, the “Bank of Mum and Dad” is not as readily available as it once was, often for the same reasons. This means that fewer parents can afford to give or loan money, while those who can, are being asked to provide more. The overall effect though is a fall in the “savings sap fund” in these challenging economic conditions. ”

The immediate effect the saving sap fund has had on parents is also alarming.  82% of parents who gave money to family members had to dip into their savings to do so, and worryingly 54% of these do not think they will be able to top up their savings. Handing money out to their kids has also led over a fifth (22%) of parents to cut back on day to day spending, one in ten have increased their own levels of debt including mortgaging or remortgaging their property, nearly a third are saving less (31%), and 12% have stopped saving altogether. If parents didn’t have to hand out their hard earned cash, 32% would have been likely to save it toward their retirement.

The research also reveals that over half (52%) of all parents with children aged 16 plus that have already given money to their children are expecting to give again in the future. This group of parents think that they will have to donate on average another £14,159, over £1,500 more than was predicted last year (£12,564), which on top of the £13,660 they have already given means that they are only half way through their giving cycle.  However, not all parents are in a position to give their children or grandchildren a helping hand. Nearly a third (31%) of those who have not given any money to their children or grandchildren could not afford to, and 18 % had no savings to give.

Iain McGowan continues “With many parents only half way through their giving cycle, this is a worrying situation to be in. Parents will not only be extremely vulnerable to any unforeseeable circumstances such as salary cuts, but the extra handouts to their kids can also affect them in retirement, meaning they may have to work longer, or make their retirement savings stretch further. The earlier parents and children get into the habit of saving the better. Saving regularly into a tax efficient savings vehicle such as an ISA can help to build up a “Sap Fund” and make a big difference.”

source: easier.com

A further nine million expect to receive a pay rise below the level of inflation, the YouGov survey suggests.

Among those who do expect a rise, nurses, civil servants and teachers expect the smallest salary increase.

The survey also suggests a third of consumers in the UK think they will be worse off this year than last.

It also suggests that more than five million consumers spend more than they earn, and of those nearly half are using overdrafts to make up the difference.

“Consumers face a double threat – the government is toying with measures such as raising taxes to reduce the public deficit, which will have a direct impact on personal finances,” said Ann Robinson at uSwitch, which commissioned the survey.

“When coupled with lower than anticipated salary increases, it can only mean that we are in for a bumpy ride, and the situation could get worse before it gets better.”

The online survey was conducted during February among 4,235 adults.

source: BBC.co.uk

Despite having gorged on expensive credit – and paid the price – it appears that our appetite for financing our lifestyles on the “never, never” has far from diminished.

Tuesday’s results from Provident Financial reveal that the number of customers using Vanquis, Provident Financial’s “non-standard” credit card – which charges up to 74.75pc APR – increased 5.4pc to 428,000 over 2009. It may seem extortionate to you and me, but it is a price that Provident’s customers appear only too happy to pay in order to consume today rather than tomorrow.

Despite the penal interest rate, the average customer “balance” increased more than 30pc. As Peter Cook, Provident’s chief executive, noted, existing customers are the “main source of growth”. It is a similar picture for Provident’s doorstep lending business which reported growth of 5.1pc at the year end despite charging customers an even higher interest rate than Provident’s credit card business.

The growth is not the result of a rash of irresponsible lending by Provident (although it is debatable if lending at 74pc could ever be described as responsible). Over the year Provident’s direct loans business accepted just 1pc of leads provided by brokers and the group’s impairments increased marginally from £197.3m in 2008 to £216.7m in 2009 despite the recession.

The reality is that Provident merely reflects a wider picture. Despite everything, over the last two years UK household debt has actually risen (if only marginally) increasing from £1.41 trillion in January 2008 to £1.46 trillion at the start of the year.

source: telegraph.co.uk

Total lending in January 2010 rose by £2.0bn; secured lending increased by £1.5bn in the month; consumer credit lending increased by £0.5bn (total lending in Jan 2008 grew by £8.4bn).

Total secured lending on dwellings at the end of January 2010 stood at £1,237bn. The
twelve-month growth rate was 1.0%. Total consumer credit lending to individuals at the end of January 2010 was £225bn.

The annual growth rate of consumer credit was less negative at – 0.2%.

Average household debt in the UK is ~£8,939 (excluding mortgages). This figure increases to £18,623 if the average is based on the number of households who actually have some form of unsecured loan.

Average household debt in the UK is ~£58,040 (including mortgages). If you add to this the December 2009 pre budget report figure for public sector net debt (PSND) expected in 2014-15 (excluding financial interventions) then this figure rises to £116,493 per household.

Average owed by every UK adult is ~ £30,306 (including mortgages). This is 129% of average earnings. Average outstanding mortgage for the 11.1m households who currently have mortgages now stands at ~ £111,474. Britain’s interest repayments on personal debt were £68.3bn in the last 12months.

The average interest paid by each household on their total debt is approximately £2,710 each year. According to PwC the average household will need to spend approximately 15% of net income purely to service the interest payments arising from this debt. Average consumer borrowing via credit cards, motor and retail finance deals, overdrafts and unsecured personal loans has risen to £4,667 per average UK adult at the end of January 2010.

source: myintroducer.com

IN THE 1950s Joan Nunn was the face of a well-known toothpaste in the first-ever commercial run on ITV. Last year, her husband, struggling with debts he could not pay, tried to smother her to death as she lay asleep.

On Tuesday, Peter Nunn, an accomplished chef and former financial adviser, who had hidden the scale of their mounting debts from her, was sentenced to eight years in jail by Bristol Crown Court.

Earlier this month in Wales, Hugh McFall from Oswestry, described as gentle and loving by neighbours, murdered his wife and daughter before hanging himself. He, too, had buckled under the strain of living a life he could not afford.

This year, a record 150,000 people in the UK – 15 per cent more than last year – are facing bankruptcy, but up to one million people are finding it difficult to cope.

Official figures say the UK’s privately held debt, including credit cards, mortgages and personal loans, now runs to £1.5 trillion (€1.7 trillion) – nearly twice what the treasury owes international lenders.

Including mortgages, every household owes £56,000, though the bulk of that is held by younger homeowners, while, on average, people are trying to juggle between 11 different creditors.

A house is being repossessed every 11.2 minutes. One person is being declared insolvent or bankrupt every 3.72 minutes, according to statistics compiled by the lobby group Credit Action.

The average owing on the 11 million mortgages currently outstanding is £111,000, while the average debt, including mortgages, of each UK adult is £30,000 – 129 per cent of average earnings.

Last month, the housing charity Shelter reported that up to one million people had borrowed money on their credit cards to pay their mortgage or rent over the past year – 6 per cent of all households.

Contrary to expectations, default figures on credit card debt have not risen, but some lenders are increasingly likely to go to court to tie unsecured debt to a debtor’s assets, usually their house.

Since 2000, the number of unsecured creditors taking this action has risen sevenfold, while three-quarters of the 130,000 such applications made in 2007 – the latest year for which figures are available – were granted, according to the Citizens’ Advice Bureau.

Unsurprisingly, many are finding it difficult to sleep. Three-quarters of family doctors have seen an increase in the number of patients reporting stress and depression over the past 18 months.

Men are doing worst, according to a survey carried out jointly by the Post Office and the Family Doctor Association, with an 82 per cent rise in the number reporting stress tied to money worries, compared with 74 per cent of women.

Half of all those surveyed under 30 reported sleeping troubles, with one in eight men in the age group experiencing impotence. A third of doctors are now prescribing antidepressants for patients under 30.

And the group is not just worrying about meeting its own obligations. Over half of them, according to separate Post Office polling, are now concerned about how they will support their parents in retirement.

One in 10 of all calls taken in the past year by the Samaritans in the UK concerned financial pressures, while suicide figures, which had been dropping, have been rising since 2008.

“If people don’t talk about their problems they can build up over time into more serious emotional distress,” said Samaritan trustee and professor in health policy at Edinburgh University Dr Stephen Platt.

Such are the numbers that debt advice agencies report a 30 per cent rise in calls from people needing help, and some have imposed a six-week waiting period before they see new people.

Faced with these problems, people have pulled in their horns, paying back about £400 million more in debt each month than they took on every month since last July. New credit card spending is continuing to fall, down 3.7 per cent on the year, though the amount outstanding on “plastic” jumped by £4 billion to £54 billion last year, as people were forced to stretch out repayment.

In all, total consumer credit has dropped 1.8 per cent. Savings are up by nearly 5 per cent. Shop sales, meanwhile, have shrunk. And the United Kingdom needs people to spend if it is to begin a proper recovery.

Offering evidence in Bristol at Peter Nunn’s trial for attempted murder this month, Det Sgt Lee Jones said Nunn and his wife had been due to be evicted from their home in Wookey, near Wells.

Nunn, a former member of Somerset Rotary Club, had said he wanted “to take his wife with him”. Now he faces a minimum of four years in jail, the judge has ruled.

His wife, who is 80, now lives alone on benefits in a one-bedroom flat.

It is all so far away from the glory days of the 1950s, after she had finished promoting toothpaste, when her image was captured by photographer David Bailey for the pages of Vogue and Vanity Fair .

source: Irishtimes.com

An ageing population and the poor condition of the public finances will require the state pension age to be raised to 70 by the middle of this century, one of Britain’s leading consultancies warned today.

PricewaterhouseCoopers said government plans to raise the pension age in three stages from 65 now to 68 by 2046 did not go far enough, given the sharp increase in national debt caused by the recession of the past two and a half years.

John Hawksworth, PWC’s chief economist, said that the public should be offered a deal by the state: work longer in return for an assurance that pensions would rise in line with average earnings.

He added that future governments would need to raise the pension age to 70 in order to guarantee that the earnings link would remain in place.

“The sweet spot enjoyed by the economy during the past 30 years as the post-war baby boomers moved through the workforce has the potential to turn sour as longer periods of retirement leave a lasting and expensive burden on future generations of workers,” Hawksworth said.

“Either taxes will have to rise or other policies need to adjust to deal with the higher costs of state pensions, health and long-term care, as well as the large debt hangover from the global financial crisis,” he said.

Hawksworth added that plans to raise the pension age to 66 by 2020, to 67 by 2036 and to 68 by 2046 provided part of the solution to the rising cost of retirement but did not go far enough.

The savings from raising the state pension age to 70 would be £9bn a year at today’s prices, enough to cover the majority of the costs of an earnings-indexed basic pension.

“This would restrict greatly the spread of means-testing for future pensioners and avoid adding to the already large burdens of public debt and taxation on the children and grandchildren of the baby boomers,” he said.

PWC estimates that pushing the state pension age up to 70 would avoid the need for higher taxes, which would amount to 2p on the basic rate of income tax or a two-point increase in VAT.

The consultancy’s report – Working Longer, Living Better – said the changes to the state pension age should be accompanied by the scrapping of the “increasingly anachronistic” default retirement age for employees.

source: Guardian.co.uk

The organisation said 66 per cent of its members have dealt with personal insolvencies involving people who have signed up for the cards without fully understanding them or realising that they are entering a legally-binding contract.

A further 78 per cent believe many consumers unwittingly go over budget on store cards because they do not consider spending on them to be as “real” as using cash.

In one case, a couple ran up a debt of £150,000 on ten store cards buying clothes and toys for their two children, while in another incident, a man who was declared bankrupt with debts of £384,000 was found to owe £125,000 on more than 20 credit and store cards.

R3 has therefore called for a ban on the “irresponsible practice” of allowing shop staff with no formal financial qualifications to offer the cards at checkouts.

The organisation’s president Peter Sargent said: “Store cards must be handled just like any other credit card.”

source: myfinances.co.uk

Figures from Unbiased.co.uk show that although the total owed on personal loans has stayed constant over the past 12 months, outstanding credit card commitments have risen.

At present some £54 billion is owed on cards, an increase of £4 billion from last year.

With the research also showing the country’s Debt Freedom Day – the point at which enough money has been earned to pay off interest – was last Saturday (February 20th), Karen Barrett, chief executive of Unbiased.co.uk, points out “now is a better time than ever” to get to grips with debt.

However, doing so does not have to be “a daunting task”.

Such comments come as Ian Boden-Smyth, spokesperson for the UK Insolvency Helpline, recently claimed that his organisation will “pretty busy” during the first quarter of 2010 as people look for assistance in tackling their debts.

By Which4u.co.uk  (Bret Clement)

The news that average credit card rates hit a 12-year high was the first shocker, given that it coincides with the lowest ever Bank Rate of 0.5pc. Yes, you might have been forgiven for thinking credit-card rates should be falling as the cost of borrowing hits a nadir. But that’s because you live in the real world, not the make-believe one of financial services companies, where rules are made up as they go along and smoke and mirrors are used to confuse customers into coughing up more cash than they should.

Rates have been creeping up gradually, but not across the board. Instead, providers have been singling out certain types of borrowers and lifting their rates out of the blue, which makes it harder to detect their wrongdoing. At first, it was thought those customers deemed to be a high risk were being punished for missing payments and going over their limit. This is hard to justify as they already get hit with penalties for this.

But then again these penalties have been capped at £12 by the Office of Fair Trading, which put a squeeze on the ability of credit-card providers to bring in more revenue. So maybe we have all been a bit naïve in thinking the banks and credit-card firms would accept this loss of income. Of course they haven’t. Instead, they have clawed this money back elsewhere, and have decided ”rate jacking’’ is the way to go. So if you behave yourself and pay your bill on time and don’t go over your limit you’ll be safe, right? Wrong.

It’s not just potential bad debtors who are being hit with higher rates – those with excellent credit records are also being targeted.

So is the answer to find some middle ground – miss the odd payment every now and again and go over your limit once or twice a year? Sadly this isn’t a fail-safe tactic either. They will still get you.

The most reliable solution would be to phone your credit-card firm, complain about the rate rise and then threaten to leave if they don’t back down. Just as we came to terms with this, we heard the cheery news that inflation was still heading north, just like the bumper profits at Barclays. Prices are now rising at 3.5pc for the average British household, which isn’t exactly the best timing given we’re shaking off the effects of a recession, struggling with unemployment and seeing the unjustified rise in the cost of borrowing.

Like a naughty schoolboy, Mervyn King has to write to Alistair Darling if inflation is more than one percentage point outside the Government’s 2pc target. Although he claims this rise is ”temporary’’ – partly due to VAT going back to its original level – critics are not so sure.

Maybe if it happens too often Mr King will resort to text messaging Mr Darling, saving time and money. ”Hi Al. Sorry I did it again m8. Merv’’ might be the quickest way to pass on the bad news to the Chancellor.

Whatever happens to inflation, the real victims are savers, who have seen savings account rates plummet. They have spent a lifetime putting money aside and now are fighting a losing battle to get a real rate of return. Meanwhile, the bankers who brought the world economy to its knees seem to be just as keen as ever to grab their bonuses and carry on as if nothing had happened.

Source: Telegraph.co.uk