Banks have hiked three quarters of their customers’ credit card limits, and they didn’t even bother asking first.
According to a survey by consumer magazine Which?, 71% of respondents saw their spending threshold increase, an astonishing fact considering we find ourselves in the midst of a credit crunch.
The survey also found that 62% had been sent credit card cheques, which carry a cash handling fee and charge interest at the higher cash advance rate with no interest-free period.
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Time to mend their ways
And these are just the latest in a series of examples of how banks are promoting irresponsible spending - three weeks ago Barclays came in for heavy criticism after releasing a trial version of a credit card with a whopping £25,000 limit, a 14.9% APR and no introductory interest rate offer.
Its advertising payoff line? “If I see something I want, I need to be able to act quickly and not have to wait to arrange finance, or be stuck with a high rate of interest.”
But things could be about to change. Following an independent review of the UK banking code, banks and building societies have pledged to introduce better credit assessments that would improve both responsible lending and the transparency of information on credit cards.
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We all have our part to play
Certainly by constantly throwing more credit at our doorstep the banks are guilty of giving us more rope.
But only we can put the credit noose around our neck, and we must take responsibility for improving our own financial situation. There are so many tips to reduce monthly outlays that require little effort but can make a massive difference.
For starters, if you have any credit card debt that is earning interest, switch it immediately to a card offering a lengthy interest free period on balance transfers – Virgin’s Mastercard is your best bet, offering 15 months at 0% then reverting to 15.9% thereafter.
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Red is the new black
Unless you’ve been avoiding the media like the plague, you’ll no doubt have noticed that banks are offering some attractive rates on saving. Unsurprisingly, a lot of people are lured into putting money aside even though they still owe money elsewhere.
This is a terrible financial move, as debt always earns interest at a far faster rate – the top saving product at the moment Anglo Irish Bank’s fixed rate product, offers a 6.75% AER but the average credit card APR stands at 17.49%.
So don’t bother with your savings until any debt (besides your mortgage) is eliminated.
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