I have poor credit and need a 0% balance transfer card

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A question we often get from our users is how can they get a 0% interest credit card when they have poor credit history. Unfortunately the short answer is you can't. To be eligible for the 0% Balance Transfer cards you need to have good or excellent credit history.

Depending on the amount of balance you have, you should research the options below:

1) If you have over £5K in unpaid balances on more than 1 credit card then you could look at Debt Management Plan/ Debt Consolidation Program.

You can read/ research more about these options here
http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingDebt/PlanYourWayOutOfDebt/DG_10023185

2) If you have less than £5K in unpaid balances then the best option might be to get a personal loan (only at a lower interest rate than your credit card) and pay off the credit card. You probably will find the best rates with a credit union as most private loan providers have high rates for poor credit customers.

Sorry the answer is probably not what you want to hear, but we believe these are your options. If you can provide us with more details on your situation we can try to help you further. You can also email us any further questions privately at: questions@comparetopcards.co.uk

Over a million UK borrowers charged mortgage payments to their credit card

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According to a recent poll by housing charity Shelter, its estimated that over 1 million borrowers in the United Kingdom are exchanging mortgage debt for plastic. Survey results published yesterday revealed 6% of respondents liable for rent or mortgage said they paid by credit card at some point in the last 12 months. This percentage if applied nationally it would mean over 1 Million households did this.

This is a shocking discovery and another statistic that shows the toll the recent credit crisis has taken on the consumers. The situation is worse in larger cities especially London where one in twelve are paying their mortgage or rent payments with a credit card. While it is known or expected that the working class is suffering the most with 8% of working class professionals testifying to the practice, even the middle and upper-class households are falling victim with 4% of these respondents testifying to the practice.

It is indeed a sorry state of affairs where people are struggling to the extent they fear losing their home and are increasing their credit card debt. This is an extremely dangerous policy for two reasons:

1) Credit Card debt is usually significantly more expensive with typical APR rates almost 3 times the mortgage typical APR rates. This means this debt grows at a significantly faster pace and can lead to bankruptcy.

2) Credit Card companies are not subject to the same rules as mortgage lenders and can more easily get a possession order from court and force a property sale in order to recover credit card debt.

We urge our readers to not fall into this trap and seek immediate help if they are contemplating using credit cards to pay mortgage or rent. Please call Shelter's free helpline on 0808 800 4444 if you're struggling to pay rent and on 0300 3300 515 if you're struggling to pay your mortgage.

RBS & HSBC rationing credit cards to existing bank customers

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Two of the largest British Banks, RBS and HSBC, are trying to reduce risks of their credit card portfolio by restricting new credit card applications to only their current account customers. RBS made these changes on Oct. 1 .These changes also apply to their NatWest brand of credit cards. The bank, 70%-owned by the government, currently has seven million credit-card accounts. HSBC the biggest bank in the UK also has made it clear credit cards are available only to its existing customers. HSBC had made these changes a while back when the credit crunch started.

Analysts view this move by the banks as a way to reduce the risks of their credit card portfolios. Having credit card customers that are also current account holders gives these banks better insight into the customers likelyhood of default as they get visibility into spending habits and repayment history. As a result they can set fees and credit limits appropriate with the risks. Also, in an economy where credit is harder to get this can be a great way to attract new deposits, a valuable source of bank funding.

So far two other major UK banks Barclays PLC and Lloyds Banking Group PLC have not followed suit. A spokeswoman for Lloyds, which issues card under its Halifax, Bank of Scotland and Lloyds brands, said the bank "has no plans to go in that direction."

For the sake of the UK consumers we hope that no further banks will choose to follow RBS and HSBC, as this limits competition and drives up cost of borrowing for the consumers when they need it the most. While we hope no banks follow suit, we expect more banks and building societies will follow suit or restrict their best offers to existing customers.

UK Credit Card Lending & Repayments still falling but at a lower rate

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According to Q2 2009 data release by APAC's, gross credit card lending to individuals during the second quarter of 2009 amounted to £30.7 billion and repayments were £30.0 billion. Gross lending was 6.3% lower and repayments were 5.2% lower than during the second quarter of 2008 when the figures were £32.8 billion and £31.6 billion respectively. This compares with 8.7% and 7.9% drop in gross credit card lending and repayments respectively in Q1 2009. Not only has the value of credit card transactions dropped, the volume also dropped 0.1% vs Q2 2008.

Repayments amounted to 97.6% of gross credit card advances in the second quarter of 2009, a higher percentage than in the corresponding period of 2008 when it was 96.4%. This shows consumers are still trying to avoid taking on more debt and trying to live within their means as a result of the credit crisis.

While credit card purchases and transactions have dropped the use of plastic continues to grow albeit at a lower rate driven by debit cards.In the second quarter of 2009 there were 1.97 billion plastic card purchases made in the UK totalling £95.5 billion compared to 1.84 billion purchases totalling £92.7 billion in the second quarter of 2008. The number of purchases was 6.9% higher than in 2008 Q2, and spending was 3.0% higher. Debit cards accounted for 74.7% of all plastic card purchases in Q2 2009 compared with 73.3% in Q2 2008.

While credit card rewards claims increase, cards with rewards schemes decrease

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One of the effects of the credit crisis has been there are fewer credit cards with rewards schemes, especially cash back and shopping rewards, available in the UK today than a year ago. Only 66.8% of credit cards offer rewards compared with 78.2% a year ago. Sainsbury's credit card's research based on analysis by Defaqto shows a 7% drop in number of credit cards with rewards schemes from a year ago. The biggest drop (20%+) is in the cash back & shopping rewards credit card categories.

This decrease in available rewards credit cards has occurred while more and more consumers are taking advantage of rewards provided by these cards. According to a survey carried out by ICM Research, 54% of rewards card holders have claimed some or all rewards they earned in the past year compare to just 23% a year ago. Craig Hunter at Sainsbury’s Credit Cards said: “The recession has made a lot of people reassess their finances and it’s great to see that people are starting to make the most of the rewards on offer via their credit cards."

While the increase in number of card holders taking advantage of the rewards schemes is encouraging, there are still 46% that are not making use of the rewards they have earned. The average value of these rewards is estimated to be around £80. The main reasons these card holders let their earned rewards go unclaimed are -
financial value of the rewards is too small, the redemption process is too long or too difficult, they don't know how to redeem, or they are too lazy to be bothered.

To avoid unclaimed rewards, consumers should do two things:

1) More upfront research on the rewards credit cards to ensure they understand the reward scheme and the value it offers: They should know what is the value of the points or miles of the cards they are considering. For example what is the value of 1 point on the MBNA Platinum card vs 1 mile on the British Airways Amex card. How many points or miles do they get when they spend £1. Most have different point schemes (1 point/mile per £1 to 10 points per £1 spend. The value of these points differs so it is harder to do apples to apples comparison. Use calculators at credit card comparision sites such as CompareTopCards.co.uk to determine the value of the rewards. Ideally they should choose the card that provides a benefit value of 1% or higher of the spend (i.e. £1 in rewards per £100 in spend).

2) Follow some simple common sense rules: Understand how they spend money with their credit card. Do they shop often and spend sizable amounts at Sainsbury's, ASDA, Tesco? If they do then a shopping club credit card maybe a good option as usually stores give you 2x-5x the normal points when you spend at their stores. If they travel often which airline/ or alliance do they usually prefer. This will ensure you earn miles on airlines you usually fly and have enough miles to claim rewards. Also, most airlines usually offer 2x-3x miles on purchases with the airline.
If they don't shop frequently at certain stores or travel as much cash back cards might be the best choice. Most cash back credit cards typically provide between 0.5% to 1.5% cash back. This is usually based on tiered level of spending on the card, i.e. the more they spend greater the percentage of cash back. Some cards also have a higher promotional rate for first 3-6 months. So if they are planning on making some big purchases, it might be ideal time to get a cash back credit card.

UK net credit card lending showing signs of bottoming out

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Recent credit card data published by BOE is showing signs that credit card lending may have hit the bottom in March. In May'09 net credit card lending by UK or the remaining balance showed a second consecutive month of increase for the first time since Sep'08. Net credit card lending increased 4% from £43.9B in March to £45.7B in May.

This data may be the leading indicator that consumers are more confident of borrowing on their credit cards. While lending is showing some positive signs, the average interest rates at 15.89% are still close to the highest levels since the credit crisis began. Also, while net lending has increased in the 2 prior months, it is still down 6% from May’08.

Consumer credit provided by members of the Finance & Leasing Association (FLA), who were responsible for 30 per cent of all unsecured lending in 2008, fell by 18 per cent in May compared to the same month last year. So while, these maybe first signs of a turn there still is a long way to go before consumer confidence returns and credit availability and borrowing returns.

Egg's new credit card to open the floodgates for fee based cards in UK?

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Egg, the internet bank and part of Citi, announced it will be launching a new credit card tomorrow, (14 July) the Egg Money World Mastercard and will have an annual fee of £12. This move from Egg, comes after the Govt. last week released a white paper with proposals to ban unsolicited credit card cheques, increase of credit card spending limits without the borrowers consent, limits on raising interest rates on existing debt etc.

With Egg's move, the first major credit card provider announcing a fee based card, industry watchers feel this may open the floodgates for similar moves by other credit card providers. With this credit crunch, consumers have changed their credit card spending habits which has had a negative impact on credit card companies revenues and profitability.

This drop has been a result of 2 main factors:

1. Drop in percentage of consumers carrying balances on their credit cards (Auriemma Consulting group reported a 40% year over year drop) and
2. Increase in number of consumers unable to payback their credit card bills (over 10% credit card accounts were written off in 2008 vs 3%-5% in 2006).

Credit card companies will try to maintain their profitability by switching more consumers to fee based credit cards. No fee cards will still be available, but may not offer the best deals or benefits. According to Auriemma Consulting Group by 2010, all major credit card providers will have fee based credit cards.

The Egg Money World card will offer 8.9% rate on balance transfers for life (no fee) and carry a 17.8% typical APR. The card will also provide a 1% cashback upto £200/year, which can more than makeup for the £12 annual fee if used correctly. We feel this maybe a good no fee long term balance transfer offer for some, based on their spending habit.

Once we get all the details of the credit card we will be adding it to our comparison tables. To see if Egg Money World Credit Card is the best option for you, use our calculators and see your savings.

BT revamps Credit Card Rewards Program

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BT announced today it has revamped its BT credit card rewards program. Now BT credit card users will have an opportunity to earn greater discounts on their credit card. Previously the annual rewards were capped at £75 in discounts on BT bill, now users will get unlimited discounts. The BT Credit card is unique in that it links directly to the card users home telephone and broadband accounts so the discount comes off the BT bill automatically. This is especially convinent as here are no points to forget about, vouchers to lose, or numbers to call to redeem the reward.

Along with the removal of caps on the reward BT has simplified the rewards program. Now users earn 1p in discount on every £1.5 they spend on the BT credit card. This has changed from a complicated tiered structure where users earned 1p per £2 upto £250 spend/month and 1p per £1 spend on the amount beyond £250. A feature that makes this credit card attractive is it also offers 0% on balance transfers for 13 months and 0% on purchases for 3 months. The card has a typical APR of 16.9%.

The BT Credit card is issued by MBNA, one of the largest credit card issuers in the UK. Compare the BT Credit Card with other credit cards and calculate your savings.

Credit cards for poor credit

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Recently we were asked the question "Are there any credit cards that are easier to be accepted for?" The person asking the question had really bad credit rating and desperately needed a credit card to pay bills and buy food as he had just lost his job and his benefits were yet to be sorted out.

We thought we would post our response here since quite a few of our users are in that situation.


Our Response:
There are a couple of credit cards that are meant for people with poor credit. A big warning is you will have to pay extremely high interest rates and we would not recommend you to use them longer term. The interest rates range from 30%-50% APR, so for every £100 you will owe -£130 to £150 over the course of the year assuming you pay it off within a year and don't miss minimum payments.

Some credit cards you can research further:

• Barclaycard Initial Card - Typical APR 27.9% (meaning 2/3rd people get this rate- yours might be higher or lower)
• Capital One Classic Card - Typical APR 34.9%
• Aqua Card - Typical APR 35.9%
  
• The Vanquis Card - Typical APR 39.9%

The Vanquis card might be the easiest one to get in your situation as they do provide cards to people with poor credit, CCJ's but has the highest interest rate; so maybe you can start applying with the Barclaycard or Capital One, then Aqua or Vanquis if you get rejected for the other. (most card companies have instant decisions as long as they can verify your information)

Please use our calculators to compare and analyze interest costs on these credit cards.

For example if you spend £300/month on the card and repay £50/month over a year you will be charged £616 in interest on the Vanquis Card. So make sure you really need this credit card!

We will be analyzing the Aqua Card soon and adding that to our comparison tables, till then look up the information on the Aqua Credit Card from our partner below:

Aqua credit card voucher codes
eComparison.co.uk combines comparison, cashback, voucher codes and reviews in one place on over 3,000 of the UK`s leading brands.

Uk Government to announce new proposals for the credit card industry

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The UK government is expected to publish a white paper tomorrow outlining proposed new rules for the credit card industry. The Observer reports one of the proposed rules will outlaw unsolicited credit card cheques in the UK. The report cites that £500 credit card cheque can carry an additional £150 in charges if the repayment is staggered over the course of a year.

The white paper is also said to contain plans to limit the maximum APR's which have continued to increase despite BOE holding base rates at 0.5% for some time. This will help most consumers and hopefully result in more low APR credit cards being available.

This move couldn't come sooner for some consumers that are struggling with credit card debt as interest rates increase. Personal debt levels in the UK are approaching £1.5 trillion, according to charity Credit Action. This equates to around £60,000 per UK household. This move by the UK government follows similar recent actions by the US government.

This move is likely to re-raise the debate on should the government impose limits on APR rates or should it leave it to the free market to determine the interest rates. Take our poll and voice your opinion.