OFT look into credit card competition
The government’s OFT (Office of Fair Trading) will be looking into equality and competition within the UK’s over saturated Credit Card industry.
As spending on plastic skyrockets, major credit card companies will come under the watchful eye of the OFT, which will assess the fairness of business operations in the highly competitive, but unsecured consumer credit market.
The OFT recently made public its plans to deal with the knock on effect of the credit crunch, and how this has affected the financial services sector. One of it main priorities within the UK is to increase the overall responsibilities of lenders within credit card companies, to the obvious benefit of the consumer.
“With our focus on credit, we are addressing the area in which there is a real risk of short-term consumer harm while also ensuring that the sector that emerges from the current crisis is competitive and behaves fairly and responsibly towards consumers,” said OFT chief executive John Fingleton.
The G20 meetings, which were wrapped up last week, led to promises over improving the global financial services industry and to ensure tighter regulation on financial markets. The OFT however, have a big task in hand, ensuring that government changes to the finance sector don’t weaken the already problematic credit sector.
How to manage your Credit more effectively
Having credit is not all bad if managed correctly, whether it allows you to buy that dream house, get you out of tight spot or be used to build yourself a solid credit rating. Poor management however, are where problems can arise.
Some basic pointers when using credit:
- Only buy what you can afford to repay - One mantra i have always tried to use is this one. With the latest shiney gadgets, or must have accessories being paraded in our faces on a day to day basis, it can be difficult to resist the urge to spend. But, do you really need to make that purchase? The buy now, consider the consequences later attitude is not ideal when facing 16.9% APR charges!
- Make sure your payments are frequent and in full - If possible, always try to pay off your balances in full at the end of the month. Whether that is a credit card purchase, or your mortgage payments, the same rule applies. This enables you to both avoid any fees, and limit the amount of interest you pay to your credit supplier.
- Know your limits - If you have a £1,500 limit on your credit card, don’t go over it! You will probably pay through the nose for exceeding your limit.
- Keep track of your spending - Set up an online account that coincides with your credit card statements, that way you can quickly check your spend for that month and act accordingly. Most well known credit suppliers will be able to offer online account support.
- Keep an eye out for mistakes - Although many credit card companies offer insurance or protection against fraud, Credit card fraud does and will continue to exist for the foreseeable future. Keep a beady eye on your statements and check any unusual items out. Dont let any fraudulent purchases go unnoticed.
- Be sensible - Don’t apply for credit unless you really need it, or you are doing it for building your credit rating. Many people are under the impression they need credit, when in fact they don’t! Having that temptation there to spend can be problematic.
In the right hands, credit cards can be very useful, but unless you need to make a large purchase or are looking for the payment insurance - try and stick to cash or debit cards.
Cashback Credit Cards
Cashback Credit Cards - Earn while you spend
Money earned through cashback can range from 0.5 to 5%
Im going to start off my first Credit card post with one that will hopefully make your money work harder, and you will be rewarded for spending! If you require a credit card, or are a frequent user of your favourite plastic, then i would recommend a credit card with cashback functionality.
Normally, an average credit card will charge you interest based on your outstanding balance in return for you using the card - simple as that. However, in the battle win over new customers, some credit companies are offering you cash back for every time you spend on the card. The money is tax free, and can range anywhere from 0.5 to 5% of your spenditure. The secret to using such a card, is to use the card as much as possible on all of your purchases, but once your bill comes at the end of the month ensure it is paid off in full - and no exceptions!!!
Why pay it off in full each month?
If you don’t pay off your balance each month in full, you will be charged interest on that balance - effectively wiping away the main benefit of the card! Therefore, i would recommend that you set up a direct debit to pay off the balance, which will automatically debit your bank account the total amount spent each month.
These cash back cards also should rarely be used as a balance transfer card, as they usually come with high interest rates! The reason they offer cashback on yuor spending is because they WANT YOU TO GET INTO DEBT!! Don’t forget that. For that reason, avoid using the card for cash withdrawals, which are usually charged, and make sure you read the small print to find out any other charges or fees that may be applicable to your card.
Do a simple google search for “cash back credit cards” and the like and have a hunt around for a killer deal - if you love spending, and can make the full payments, you would be stupid to miss this. Remeber, gaining money here is so simple, you just go about your day to day business, and be paid for the pleasure.
