UK credit or debit cardholders can now spend up to £15 without offering a Pin number or a signature after the payment limit was raised for contactless cards.
A request by Visa and Mastercard to raise the limit from £10 was agreed by banks and other card providers.
An estimated one in seven UK residents will have a contactless card by the end of the year, allowing them to put it close to a sensor to pay for items.
The new threshold brings the UK closer in line with European limits.
In the eurozone, contactless cards can be used for total purchases of up to 25 euros (£22.60).
Renewed focus
Contactless technology allows cardholders to press their debit card to a sensor in more than 8,000 UK shops to register a payment. The money is automatically deducted from their bank account or added to their credit card bill.
In East Asia the chip found in a plastic card is placed in an everyday item such as a mobile phone or a watch. This is then pushed against a sensor in a shop to pay.
The UK has been relatively slow to take up the technology, partly owing to security concerns, but plans to phase out cheques by 2018 could put more focus on the service.
Occasionally, cardholders are asked to enter their Pin, as they are for purchases above £15. No cash-back is available.
The card provider covers any losses if a card is stolen and the customer reports the loss at the earliest opportunity and does not act negligently.
Rising popularity
When contactless technology started to become more mainstream, the payments industry set a limit of £10 on spending via a contactless card.
The increase to a £15 limit - across the industry - was aimed at making the technology more appealing to shopkeepers and as a response to demand from cardholders, according to a spokeswoman for the UK Cards Association.
She added that the relatively small sum meant that there remained little temptation for fraudsters.
Anyone sent a new Barclays Visa debit card will have the contactless technology built into the card as standard. Some four million contactless Barclaycard credit cards have also been issued.
"Contactless technology is undoubtedly the future of payments and we are seeing it grow hugely in popularity," said Brian Cunnington of Barclays.
"The new higher limit gives customers the flexibility of paying for even more transactions quickly, securely and conveniently via a contactless card payment and will lead to more retailers implementing the technology."
Monday 15 March 2010
Authorising third parties to take cash from your debit or credit card can be really draining
BANK customers have received a warning not to sign up to "recurring payment authorities", after a huge surge in complaints from customers who have found it impossible to stop money being taken out of their accounts.
At the same time, credit-card companies have seen an explosion of fraudulent transactions using this method, with organised criminals taking small sums regularly in a bid to avoid detection.
Most consumers use some form of automatic payments from a current or credit card account to make sure bills, such as mortgages, rentals, subscriptions, and payment for utilities, are paid on time.
Traditionally, standing orders were used by customers to instruct banks to make a regular fixed payment at a certain date. No-one but the customer, or the bank on instruction, could set up, alter or end these arrangements.
But standing orders were not very flexible, and so direct debits were introduced, to give suppliers, such as a gas or electricity companies, the power to instruct the bank on your behalf to give them a variable amount of money from your account to cover payments.
Companies like direct debits because they give certainty of payment, and many will offer discounts to customers who pay in this way. However, handing power to a third party to take money out of your account seemed a high risk move when they were first introduced in the 1970s, so safeguards were provided to give the public peace of mind.
If a mistake is made either by the retailer or the bank, and money is removed from your account erroneously, consumers are covered by a guarantee of an immediate "no quibble" refund from the bank. Customers remain in control in that they can stop payment altogether.
But direct debits and standing orders can only be used with a bank account, and they require you to have the cash in the bank or an agreed overdraft facility to cover the transaction.
Not everyone is always in such a position. "Recurrent" or "continuous" transactions were developed as a way of encouraging consumers into purchases by allowing them to spread the cost over a period of time, by making small regular payments. Furthermore, transaction are linked to a credit or debit card, allowing customers to buy using borrowed money.
With these arrangements, however, all control rests with the retailer. Once signed up, customers can feel powerless to extract themselves, and are forced to watch helplessly as money disappears from their accounts. Most people are completely unaware of how vulnerable they are, until something goes wrong. In many cases they are completely unaware what they have agreed to, believing they have signed up for a direct debit, which they can cancel at will, or a one-off payment.
Unlike a direct debit, a "continuous-payment authority" can only be cancelled by the business that holds it. Once signed, neither the bank nor the customer can intervene, and there is no bank guarantee of immediate money back if something goes wrong.
One key to understanding what you are letting yourself in for is the information you are required to give. If a firm merely asks for your bank account sort code and account number then it will be a direct debit. However, if it requires the much longer credit card or debit card digits, then it will almost certainly be a recurring transaction.
Another big problem with these transactions is that they frequently relate to online or telephone transaction where there is little if any paperwork to establish precisely what the customer believed he or she was signing up to. This can leave card-holders particularly vulnerable, not least because further contact is either prohibitively difficult, if e-mails go unanswered, or eyewateringly expensive, as you can only speak to many of these firms using premium rate telephone lines.
New regulations covering payment transactions have given slightly more robust protection against abuses, where customers can prove they have suffered serious injustice, though such instances may be limited.
Essentially, if a retailer or other service company erroneously charges you for continuous transactions then, under the new rules, they have engaged in an "unauthorised transaction". In this case, your credit card company has a duty to respond to any complaint from you by withholding further payments and refunding money you claim was withdrawn in error. Unfortunately, some card providers are better than others at acting on complaints.
However, where you have unwittingly signed up to an agreement which allows an organisation to take payments for say 12 months or longer, they are entitled to these payments. Your only option is to seek to negotiate an exit from the contract, which may not be easy or even possible.
UK Cards Association spokeswoman Sandra Quinn says: "Our advice is not to sign up to recurring transactions if you have a choice, because the investor protection is not great.
"If a firm makes unauthorised withdrawals from your account, then you can ask your credit-card company for help in sorting it out. But if you have signed an agreement which permits them to take this money, then you have to sort it out with the retailer yourself. And this can be very difficult."
The Financial Ombudsman, which is seeing a growing number of complaints about continuous payments, says part of the problem is that underlying the arrangements for continuous payment authorities are agreements between the banks and the card networks, which completely sidestep the customer.
Spokeswoman Emma Parker said: "These contractual arrangements will be binding on those who are party to them. However, that does not include the consumer, who will have no knowledge of the agreement and will not have signed up to it."
The Ombudsman finds itself uncomfortable with some of these arrangements and recently found in favour of one complainant, who had started up in business and ordered some business cards for £9.99 from online supplier, BG Ltd.
Several months later, while checking through his bank statements, he noticed that regular monthly payments of £9.99 were being made to two separate businesses he had never had any dealings with but believed them to be associates of BG Ltd. By this time he was £139.30 out of pocket.
The Ombudsman ordered the bank to refund the customer and pay him £100 for the inconvenience caused, as he could prove that he had never been party to any agreement with these other companies.
Case Study: Monthly withdrawals that went on for years
MIKE Hendry was driven to distraction after trying for two years to stop Tiscali taking £4.89 a month via what he thought was a direct debit.
Aberdeenshire-based Hendry found it impossible to get a response from the company and what annoyed him more was he had to use premium rate phone numbers each time he tried to sort the problem out, and was held waiting on lines costing him 50p per minute.
"I began the process of disentangling myself from Tiscali's dial-up service in May of 2007," says Hendry. "I phoned their helpline – charged at 50p per minute – and was given a cancellation code. I waited for the direct debit to disappear from my statements, but they never did. I repeatedly phoned and sent e-mails but nothing happened.
"I wrote to Barclaycard instructing them to stop the payment. They advised me to write to again with an accompanying letter addressed to Tiscali's bankers, requesting the payment be stopped and confirming I had no wish to use their services."
Hendry did this but nothing happened until he contacted Scotland on Sunday, by which time he reckoned he had overpaid Tiscali by £160. Within 24 hours of our contacting the company, he received a phone call offering him £200 to settle the matter.
Almost certainly Hendry had not signed up for a direct debit but a recurring or continuous payment, without realising. He admitted he would not know the difference between the two.
Tiscali has now been taken over by Talk Talk and a spokeswoman said: "We're sorry to hear about the problems Mr Hendry has experienced. We have now cancelled his account and refunded the funds taken in error."
At the same time, credit-card companies have seen an explosion of fraudulent transactions using this method, with organised criminals taking small sums regularly in a bid to avoid detection.
Most consumers use some form of automatic payments from a current or credit card account to make sure bills, such as mortgages, rentals, subscriptions, and payment for utilities, are paid on time.
Traditionally, standing orders were used by customers to instruct banks to make a regular fixed payment at a certain date. No-one but the customer, or the bank on instruction, could set up, alter or end these arrangements.
But standing orders were not very flexible, and so direct debits were introduced, to give suppliers, such as a gas or electricity companies, the power to instruct the bank on your behalf to give them a variable amount of money from your account to cover payments.
Companies like direct debits because they give certainty of payment, and many will offer discounts to customers who pay in this way. However, handing power to a third party to take money out of your account seemed a high risk move when they were first introduced in the 1970s, so safeguards were provided to give the public peace of mind.
If a mistake is made either by the retailer or the bank, and money is removed from your account erroneously, consumers are covered by a guarantee of an immediate "no quibble" refund from the bank. Customers remain in control in that they can stop payment altogether.
But direct debits and standing orders can only be used with a bank account, and they require you to have the cash in the bank or an agreed overdraft facility to cover the transaction.
Not everyone is always in such a position. "Recurrent" or "continuous" transactions were developed as a way of encouraging consumers into purchases by allowing them to spread the cost over a period of time, by making small regular payments. Furthermore, transaction are linked to a credit or debit card, allowing customers to buy using borrowed money.
With these arrangements, however, all control rests with the retailer. Once signed up, customers can feel powerless to extract themselves, and are forced to watch helplessly as money disappears from their accounts. Most people are completely unaware of how vulnerable they are, until something goes wrong. In many cases they are completely unaware what they have agreed to, believing they have signed up for a direct debit, which they can cancel at will, or a one-off payment.
Unlike a direct debit, a "continuous-payment authority" can only be cancelled by the business that holds it. Once signed, neither the bank nor the customer can intervene, and there is no bank guarantee of immediate money back if something goes wrong.
One key to understanding what you are letting yourself in for is the information you are required to give. If a firm merely asks for your bank account sort code and account number then it will be a direct debit. However, if it requires the much longer credit card or debit card digits, then it will almost certainly be a recurring transaction.
Another big problem with these transactions is that they frequently relate to online or telephone transaction where there is little if any paperwork to establish precisely what the customer believed he or she was signing up to. This can leave card-holders particularly vulnerable, not least because further contact is either prohibitively difficult, if e-mails go unanswered, or eyewateringly expensive, as you can only speak to many of these firms using premium rate telephone lines.
New regulations covering payment transactions have given slightly more robust protection against abuses, where customers can prove they have suffered serious injustice, though such instances may be limited.
Essentially, if a retailer or other service company erroneously charges you for continuous transactions then, under the new rules, they have engaged in an "unauthorised transaction". In this case, your credit card company has a duty to respond to any complaint from you by withholding further payments and refunding money you claim was withdrawn in error. Unfortunately, some card providers are better than others at acting on complaints.
However, where you have unwittingly signed up to an agreement which allows an organisation to take payments for say 12 months or longer, they are entitled to these payments. Your only option is to seek to negotiate an exit from the contract, which may not be easy or even possible.
UK Cards Association spokeswoman Sandra Quinn says: "Our advice is not to sign up to recurring transactions if you have a choice, because the investor protection is not great.
"If a firm makes unauthorised withdrawals from your account, then you can ask your credit-card company for help in sorting it out. But if you have signed an agreement which permits them to take this money, then you have to sort it out with the retailer yourself. And this can be very difficult."
The Financial Ombudsman, which is seeing a growing number of complaints about continuous payments, says part of the problem is that underlying the arrangements for continuous payment authorities are agreements between the banks and the card networks, which completely sidestep the customer.
Spokeswoman Emma Parker said: "These contractual arrangements will be binding on those who are party to them. However, that does not include the consumer, who will have no knowledge of the agreement and will not have signed up to it."
The Ombudsman finds itself uncomfortable with some of these arrangements and recently found in favour of one complainant, who had started up in business and ordered some business cards for £9.99 from online supplier, BG Ltd.
Several months later, while checking through his bank statements, he noticed that regular monthly payments of £9.99 were being made to two separate businesses he had never had any dealings with but believed them to be associates of BG Ltd. By this time he was £139.30 out of pocket.
The Ombudsman ordered the bank to refund the customer and pay him £100 for the inconvenience caused, as he could prove that he had never been party to any agreement with these other companies.
Case Study: Monthly withdrawals that went on for years
MIKE Hendry was driven to distraction after trying for two years to stop Tiscali taking £4.89 a month via what he thought was a direct debit.
Aberdeenshire-based Hendry found it impossible to get a response from the company and what annoyed him more was he had to use premium rate phone numbers each time he tried to sort the problem out, and was held waiting on lines costing him 50p per minute.
"I began the process of disentangling myself from Tiscali's dial-up service in May of 2007," says Hendry. "I phoned their helpline – charged at 50p per minute – and was given a cancellation code. I waited for the direct debit to disappear from my statements, but they never did. I repeatedly phoned and sent e-mails but nothing happened.
"I wrote to Barclaycard instructing them to stop the payment. They advised me to write to again with an accompanying letter addressed to Tiscali's bankers, requesting the payment be stopped and confirming I had no wish to use their services."
Hendry did this but nothing happened until he contacted Scotland on Sunday, by which time he reckoned he had overpaid Tiscali by £160. Within 24 hours of our contacting the company, he received a phone call offering him £200 to settle the matter.
Almost certainly Hendry had not signed up for a direct debit but a recurring or continuous payment, without realising. He admitted he would not know the difference between the two.
Tiscali has now been taken over by Talk Talk and a spokeswoman said: "We're sorry to hear about the problems Mr Hendry has experienced. We have now cancelled his account and refunded the funds taken in error."
Credit card fraud down by 28%
Total fraud losses on UK debit and credit cards fell for the first time since 2006, dropping 28 per cent, or £170m, to £440.3m in 2009, according to the UK Cards Association.
Melanie Johnson, spokeswoman for the UK Cards Association, said the sharp drop in card fraud was due to a number of different factors These included the widespread adoption of chip and PIN cards and greater use of fraud detection tools by banks and retailers.
Lost and stolen card fraud fell by 58 per cent from 2004 to 2009 and is now at its lowest level for two decades. Losses at UK retailer level fell by 67 per cent and mail non-receipt fraud dropped 91 per cent since 2004. Counterfeit card fraud losses also fell to their lowest levels since 1999.
However, as security on cards and cheques has been tightened up, criminals have turned their attention instead to online banking, where fraud losses rose by 14 per cent to £59.7m in 2009.
Criminals are using more sophisticated methods to target online banking customers through malware, which targets vulnerabilities in customers’ PCs, rather than the bank’s own systems which are more difficult to attack. There were also more than 51,000 phishing incidents recorded during 2009 – a 16 per cent increase from 2008.
“We live in a digital age and consumers need to be more vigilant about disclosing their personal information on social networking sites,” said Rumina Hassam, personal finance expert at uSwitch.com.
“Many consumers will also at some point have received an alarming email, known as ‘phishing’, asking them to divulge banking or card information, usually under the premise that there is some sort of problem with their account. Consumers must not click on the links and should take steps to ensure they use anti-virus software and a firewall for added protection.”
Help and advice on preventing all types of online banking fraud is available at www.banksafeonline.org.uk.
Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.
Melanie Johnson, spokeswoman for the UK Cards Association, said the sharp drop in card fraud was due to a number of different factors These included the widespread adoption of chip and PIN cards and greater use of fraud detection tools by banks and retailers.
Lost and stolen card fraud fell by 58 per cent from 2004 to 2009 and is now at its lowest level for two decades. Losses at UK retailer level fell by 67 per cent and mail non-receipt fraud dropped 91 per cent since 2004. Counterfeit card fraud losses also fell to their lowest levels since 1999.
However, as security on cards and cheques has been tightened up, criminals have turned their attention instead to online banking, where fraud losses rose by 14 per cent to £59.7m in 2009.
Criminals are using more sophisticated methods to target online banking customers through malware, which targets vulnerabilities in customers’ PCs, rather than the bank’s own systems which are more difficult to attack. There were also more than 51,000 phishing incidents recorded during 2009 – a 16 per cent increase from 2008.
“We live in a digital age and consumers need to be more vigilant about disclosing their personal information on social networking sites,” said Rumina Hassam, personal finance expert at uSwitch.com.
“Many consumers will also at some point have received an alarming email, known as ‘phishing’, asking them to divulge banking or card information, usually under the premise that there is some sort of problem with their account. Consumers must not click on the links and should take steps to ensure they use anti-virus software and a firewall for added protection.”
Help and advice on preventing all types of online banking fraud is available at www.banksafeonline.org.uk.
Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.
Unsecured Cash loans: Instant cash without any credit unfairness
If you arent able or unwilling to pledge any sort of collateral against the amount then unsecured personal loans is the best option for you.
London 13 March 2010
UK Financials Ltd is providing unsecured Loan at cheaper rates in UK .So if you feel that you arent able or unwilling to pledge any sort of collateral against the amount then unsecured personal loans is for you. These loans offer you amount in the ranges of £100 to £1500 for the flexible term period of 2 to 3 weeks which you may also extend it as per your need by making nominal charges. But, you must pay slightly higher interest price against this loan as it is unsecured by nature. Still you can negotiate it by making proper online research.
To fetch the funds through unsecured cash loans you are not obliged to pledge collateral against the amount. This is absolutely unsecured in nature. Now, being a tenant or homeowner reluctant to provide their home as security can simply apply for this cash facility and grab desired amount on time. Plus, you will enjoy this cash facility on affordable rate of interest. To come out with a final decision a competitive research work has to be done. It is very necessary step to enjoy the best financial deal on affordable price.
In order to get quick funds approval through bad credit unsecured cash loans you must fulfill certain eligibility criteria which are as follows:
You must be a citizen of UK.
You must possess a valid active bank account.
Your age must be 18 years or above.
You must be regularly employed.
Your monthly salary would be £1000.
With the borrowed funds one can easily fulfill their multiple purposes. It may include like pay off debt consolidation, plan an exotic holiday trip, grocery expenses, credit card payment, unexpected medical expenses etc. In fact, lenders will not constraint in this matter. You are free to utilize the amount as per your requirements.
if you need hassle free funds on time choose online mode of application and get your funds by the next few hours. You only supposed to complete a single online form with convenience of your home and submit it online. The amount will directly credit in your bank account.
Now with unsecured loans bad credit people can avail fast cash aid to despite of their adverse credit history or records problem.
UK Financials Ltd is the author of loans. where visitors can apply for any type of loans online. Get more quality information about Loans for tenant, Bad credit tenant loans, Tenant loans UK, Loans for tenant with bad credit.
Ravi Mishra is a Marketing Manager of UK Financials Ltd, expertise in searching and researching the best and competitive deal for clients. The team of expert arranges the loan for you at low cost. for more information about us visit : http://www.ukfinancialsltd.co.uk/unsecured.htm
UK Financial Limited.
501, International House,
223 Regent Street, London - W1B 2QD.
0871 956 2700
Media Contact Information
Name: UK Financials Ltd
Website: http://www.ukfinancialsltd.co.uk
Email: ukfinancials007@gmail.com
Phone: 00871956-2700
Address: 501, International House,
223 Regent Street, London - W1B 2QD.
City: london
County/State: london
Postcode/ZIP:
Country: United Kingdom
London 13 March 2010
UK Financials Ltd is providing unsecured Loan at cheaper rates in UK .So if you feel that you arent able or unwilling to pledge any sort of collateral against the amount then unsecured personal loans is for you. These loans offer you amount in the ranges of £100 to £1500 for the flexible term period of 2 to 3 weeks which you may also extend it as per your need by making nominal charges. But, you must pay slightly higher interest price against this loan as it is unsecured by nature. Still you can negotiate it by making proper online research.
To fetch the funds through unsecured cash loans you are not obliged to pledge collateral against the amount. This is absolutely unsecured in nature. Now, being a tenant or homeowner reluctant to provide their home as security can simply apply for this cash facility and grab desired amount on time. Plus, you will enjoy this cash facility on affordable rate of interest. To come out with a final decision a competitive research work has to be done. It is very necessary step to enjoy the best financial deal on affordable price.
In order to get quick funds approval through bad credit unsecured cash loans you must fulfill certain eligibility criteria which are as follows:
You must be a citizen of UK.
You must possess a valid active bank account.
Your age must be 18 years or above.
You must be regularly employed.
Your monthly salary would be £1000.
With the borrowed funds one can easily fulfill their multiple purposes. It may include like pay off debt consolidation, plan an exotic holiday trip, grocery expenses, credit card payment, unexpected medical expenses etc. In fact, lenders will not constraint in this matter. You are free to utilize the amount as per your requirements.
if you need hassle free funds on time choose online mode of application and get your funds by the next few hours. You only supposed to complete a single online form with convenience of your home and submit it online. The amount will directly credit in your bank account.
Now with unsecured loans bad credit people can avail fast cash aid to despite of their adverse credit history or records problem.
UK Financials Ltd is the author of loans. where visitors can apply for any type of loans online. Get more quality information about Loans for tenant, Bad credit tenant loans, Tenant loans UK, Loans for tenant with bad credit.
Ravi Mishra is a Marketing Manager of UK Financials Ltd, expertise in searching and researching the best and competitive deal for clients. The team of expert arranges the loan for you at low cost. for more information about us visit : http://www.ukfinancialsltd.co.uk/unsecured.htm
UK Financial Limited.
501, International House,
223 Regent Street, London - W1B 2QD.
0871 956 2700
Media Contact Information
Name: UK Financials Ltd
Website: http://www.ukfinancialsltd.co.uk
Email: ukfinancials007@gmail.com
Phone: 00871956-2700
Address: 501, International House,
223 Regent Street, London - W1B 2QD.
City: london
County/State: london
Postcode/ZIP:
Country: United Kingdom
Credit Card Debt Risk For Pensioners
The information on this page is intended for use solely by members of the media and may be reproduced or republished stating Key Retirement Solutions as the author. Customers should not use this information to form an opinion about equity release in relation to their individual requirements.
March 15, 2010
CREDIT CARD DEBT RISK FOR PENSIONERS
• One in five over-65’s owe money on their credit cards with average debt of £8,967, says Key Retirement Solutions
Pensioners cashing in on the value of their homes owe an average of £8,967 in credit card debts, new research* from leading independent equity release adviser Key Retirement Solutions shows.
Its analysis shows one in five over-65 homeowners taking out equity release owe money on plastic with average debts increasing for the over-70s. Customers aged 65-69 owe an average £8,881 while the over-70s are £9,048 in debt.
Key Retirement Solutions, which analysed applications from 3,501 customers in 2009, warns that credit card debt is taking a substantial bite out of pensioner incomes with many over-65s unlikely to ever be able to clear their plastic.
The analysis comes as the Government announced plans, which come into effect in February 2011, to force card firms to clear debts at higher rates of interest first as well as banning rate rises and credit increases for people in financial difficulty and giving customers 60 days to reject rate rises.
Key Retirement’s analysis shows that pensioners making the monthly minimum repayment on a balance of £8,967 at an average 18.8% rate would pay £141 out of average gross pensioner incomes of £16,000.
That equates to 10% of monthly income before tax – but someone only paying the minimum would take 30 years and one month to clear the debt without spending any more on the card.
Bank of England*** figures show credit card lenders wrote off £4.1 billion of credit card debt in 2009 as borrowers defaulted.
Dean Mirfin, Business Development Director at Key Retirement Solutions, said: “Debt is a way of life for a substantial number of people and the over-65s are not immune. Many are perfectly comfortable with owing money on their credit cards and it can be a sensible way of planning for major purchases.
“However the over-65s are more at risk as once they retire they may no longer have the income to service the debt and in many cases to ever clear their credit card balance.
“Many of them do though have substantial wealth tied up in their homes which represents a potential source of income particularly when other sources of retirement income are under pressure from low interest rates and annuity rates.”
Key Retirement Solutions’ Pensioner Property Equity Index shows the over-65s have property wealth of around £765.18 billion after paying off mortgages and gaining from increases in house prices.
Research among its customers shows the average monthly payment on credit card debt is £238. Someone paying that amount would clear their debt within four years and seven months assuming they don’t continue to spend.
Around 48% of the customers it spoke to were aged 65-69 while 52% were aged 70-plus.
For anyone looking to release equity from their home to help ease the financial burden in retirement, key’s independent guide to equity release is the best place to start. This can be obtained by calling 0800 531 6010 or visiting our website https://www.keyrs.co.uk/free-guide where the guide can be downloaded.
Notes to Editors
* Key Retirement Solutions own database of 3,501 customers applying for equity release products in 2009
** http://www.nao.org.uk/whats_new/0809/0809961.aspx
*** http://news.bbc.co.uk/1/hi/business/8543083.stm
Citigate Dewe Rogerson
Phil Anderson/Kevan Reilly/Paul Griffin
0207 282 1031/1096/1041
About Key Retirement Solutions
Founded in 1998 Key Retirement Solutions is the leading independent adviser specialising in equity release. Key Retirement Solutions is a limited company registered in England No 2457440 with its Head Office at Key Retirement Solutions, Harbour House, Portway, Preston, Lancashire, PR2 2PR.Key Retirement Solutions is authorised and regulated by the Financial Services Authority.
For more information, please contact:
Dean Mirfin (Business Development Director)
Key Retirement Solutions
07879 678737
Press Office
Key Retirement Solutions
01772 508533
March 15, 2010
CREDIT CARD DEBT RISK FOR PENSIONERS
• One in five over-65’s owe money on their credit cards with average debt of £8,967, says Key Retirement Solutions
Pensioners cashing in on the value of their homes owe an average of £8,967 in credit card debts, new research* from leading independent equity release adviser Key Retirement Solutions shows.
Its analysis shows one in five over-65 homeowners taking out equity release owe money on plastic with average debts increasing for the over-70s. Customers aged 65-69 owe an average £8,881 while the over-70s are £9,048 in debt.
Key Retirement Solutions, which analysed applications from 3,501 customers in 2009, warns that credit card debt is taking a substantial bite out of pensioner incomes with many over-65s unlikely to ever be able to clear their plastic.
The analysis comes as the Government announced plans, which come into effect in February 2011, to force card firms to clear debts at higher rates of interest first as well as banning rate rises and credit increases for people in financial difficulty and giving customers 60 days to reject rate rises.
Key Retirement’s analysis shows that pensioners making the monthly minimum repayment on a balance of £8,967 at an average 18.8% rate would pay £141 out of average gross pensioner incomes of £16,000.
That equates to 10% of monthly income before tax – but someone only paying the minimum would take 30 years and one month to clear the debt without spending any more on the card.
Bank of England*** figures show credit card lenders wrote off £4.1 billion of credit card debt in 2009 as borrowers defaulted.
Dean Mirfin, Business Development Director at Key Retirement Solutions, said: “Debt is a way of life for a substantial number of people and the over-65s are not immune. Many are perfectly comfortable with owing money on their credit cards and it can be a sensible way of planning for major purchases.
“However the over-65s are more at risk as once they retire they may no longer have the income to service the debt and in many cases to ever clear their credit card balance.
“Many of them do though have substantial wealth tied up in their homes which represents a potential source of income particularly when other sources of retirement income are under pressure from low interest rates and annuity rates.”
Key Retirement Solutions’ Pensioner Property Equity Index shows the over-65s have property wealth of around £765.18 billion after paying off mortgages and gaining from increases in house prices.
Research among its customers shows the average monthly payment on credit card debt is £238. Someone paying that amount would clear their debt within four years and seven months assuming they don’t continue to spend.
Around 48% of the customers it spoke to were aged 65-69 while 52% were aged 70-plus.
For anyone looking to release equity from their home to help ease the financial burden in retirement, key’s independent guide to equity release is the best place to start. This can be obtained by calling 0800 531 6010 or visiting our website https://www.keyrs.co.uk/free-guide where the guide can be downloaded.
Notes to Editors
* Key Retirement Solutions own database of 3,501 customers applying for equity release products in 2009
** http://www.nao.org.uk/whats_new/0809/0809961.aspx
*** http://news.bbc.co.uk/1/hi/business/8543083.stm
Citigate Dewe Rogerson
Phil Anderson/Kevan Reilly/Paul Griffin
0207 282 1031/1096/1041
About Key Retirement Solutions
Founded in 1998 Key Retirement Solutions is the leading independent adviser specialising in equity release. Key Retirement Solutions is a limited company registered in England No 2457440 with its Head Office at Key Retirement Solutions, Harbour House, Portway, Preston, Lancashire, PR2 2PR.Key Retirement Solutions is authorised and regulated by the Financial Services Authority.
For more information, please contact:
Dean Mirfin (Business Development Director)
Key Retirement Solutions
07879 678737
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Credit card firms make repayments cheaper
The government announced new rules for credit card issuers on Monday which it claims could save customers hundreds of millions of pounds a year.
The joint commitment, with the UK Cards Association which represents the credit card industry, included measures such as card companies having to change how customers’ repayments are allocated, to pay off more expensive debt first. Currently, repayments are generally applied to the cheapest debt first - adding substantially to customers’ interest costs.
“I’m delighted that the biggest credit card rip-off is coming to an end,” said Ed Bowsher, head of consumer finance at lovemoney.com. “Negative payment hierarchy has been a massive money-maker for the credit card industry. In fact, I’ve been told by industry insiders that this rip-off has been the biggest single contributor to credit card profits in recent years.”
Melanie Johnson, chair of the UK Cards Association, said these key changes will be in place by the end of this year and will become part of the Lending Code.
Other changes include card companies having to contact any customer who repeatedly only makes the minimum repayment to make clear that this is the most expensive way of paying off a debt. Currently, an estimated 3 per cent of customers pay the minimum for 12 consecutive months.
Measures will also be introduced to prevent any customer who is facing financial difficulty from being offered an unsolicited credit limit increase. Anyone offered a credit limit increase will also be offered a 30-day notice period and a simple means of “opting-out”. Around 8 per cent of the 58m credit card accounts in UK had a credit limit increase in 2009.
These new rules will involve a variety of system changes across the UK’s credit card companies, which are estimated to cost the industry about £533m over the next two years.
”Combined, this series of small steps slices credit card stealth charges in half. While I wish it’d been introduced twenty years ago, it’d be churlish not to recognise this one swoop incorporates many of the changes those of us who’ve been campaigning on these issues have been asking for an age,” said Martin Lewis, creator of MoneySavingExpert.com, a consumer website.
However, some experts believe more changes could be made. For example, penalty charges for late payments are typically £12, which is much higher than the cost for the credit card companies. Charges for cash withdrawals at ATMs using a credit card are also too high, said Mr. Bowsher from lovemoney.com.
Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.
The joint commitment, with the UK Cards Association which represents the credit card industry, included measures such as card companies having to change how customers’ repayments are allocated, to pay off more expensive debt first. Currently, repayments are generally applied to the cheapest debt first - adding substantially to customers’ interest costs.
“I’m delighted that the biggest credit card rip-off is coming to an end,” said Ed Bowsher, head of consumer finance at lovemoney.com. “Negative payment hierarchy has been a massive money-maker for the credit card industry. In fact, I’ve been told by industry insiders that this rip-off has been the biggest single contributor to credit card profits in recent years.”
Melanie Johnson, chair of the UK Cards Association, said these key changes will be in place by the end of this year and will become part of the Lending Code.
Other changes include card companies having to contact any customer who repeatedly only makes the minimum repayment to make clear that this is the most expensive way of paying off a debt. Currently, an estimated 3 per cent of customers pay the minimum for 12 consecutive months.
Measures will also be introduced to prevent any customer who is facing financial difficulty from being offered an unsolicited credit limit increase. Anyone offered a credit limit increase will also be offered a 30-day notice period and a simple means of “opting-out”. Around 8 per cent of the 58m credit card accounts in UK had a credit limit increase in 2009.
These new rules will involve a variety of system changes across the UK’s credit card companies, which are estimated to cost the industry about £533m over the next two years.
”Combined, this series of small steps slices credit card stealth charges in half. While I wish it’d been introduced twenty years ago, it’d be churlish not to recognise this one swoop incorporates many of the changes those of us who’ve been campaigning on these issues have been asking for an age,” said Martin Lewis, creator of MoneySavingExpert.com, a consumer website.
However, some experts believe more changes could be made. For example, penalty charges for late payments are typically £12, which is much higher than the cost for the credit card companies. Charges for cash withdrawals at ATMs using a credit card are also too high, said Mr. Bowsher from lovemoney.com.
Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.
Credit card holders given better repayment deal
Government measures force card providers to reduce the costliest part of a debt first, saving card holders millions of pounds in interest payments
Credit card firms will be forced to change the way they make customers pay off their debts, in a move that could save 9 million borrowers a typical £225 each a year, the government announced today.
The move is part of a package of measures to tackle indebtedness unveiled this morning by the prime minister, Gordon Brown.
Currently, when cardholders transfer a debt to a card provider at a low or zero rate of interest, and subsequently buy items on the card at a higher rate of interest, often around 20%, most card companies force them to pay off the cheaper debt first when they make repayments.
This makes the costlier debt on the card last longer, thus prolonging the debt and earning the card companies more interest.
Today, the government said it would introduce legislation to stop the practice, known as "adverse order of payments", in a move that will save 9 million of the country's 30 million cardholders around £500m a year, according to one building society.
However, the government decided against setting a minimum monthly repayment for consumers, or capping interest rates on cards.
The package of measures, which have been agreed with the credit card and store card industry, gives consumers five rights:
• Right to repay: consumers' repayments will always be put against the highest rate of debt first. For consumers opening new accounts the minimum payment will always cover at least interest, fees and charges, plus 1% of the amount they have borrowed.
• Right to control: consumers will have the right to tell their providers never to increase their credit limit, and the right to reduce their limit at any time.
• Right to reject: consumers will be given 60 days to switch provider if informed of an increase in their interest rate, and will be able to reject the offer of any increase in their credit limit.
• Right to information: consumers at risk of financial difficulties will be given guidance on the consequences of paying back too little; and all consumers will be given clear information on increases in their interest rate or their credit limit including the right to reject.
• Right to compare: consumers will have an annual statement that allows for easy cost comparison with other providers.
In addition, the government said it would protect consumers who were at risk of financial difficulties by banning card providers from increasing their credit limit or interest rate, and allow consumers to access their credit records for free or just £2.
Brown said: "Step by step we are reinventing the financial services industry after the global financial crisis and moving the balance of power back towards consumers.
"These new rights will put an end to the irresponsible lending practices that people have been most concerned about, and help cut the cost of borrowing."
Positive order of payments
Credit card firms will be forced to change the way they make customers pay off their debts, in a move that could save 9 million borrowers a typical £225 each a year, the government announced today.
The move is part of a package of measures to tackle indebtedness unveiled this morning by the prime minister, Gordon Brown.
Currently, when cardholders transfer a debt to a card provider at a low or zero rate of interest, and subsequently buy items on the card at a higher rate of interest, often around 20%, most card companies force them to pay off the cheaper debt first when they make repayments.
This makes the costlier debt on the card last longer, thus prolonging the debt and earning the card companies more interest.
Today, the government said it would introduce legislation to stop the practice, known as "adverse order of payments", in a move that will save 9 million of the country's 30 million cardholders around £500m a year, according to one building society.
However, the government decided against setting a minimum monthly repayment for consumers, or capping interest rates on cards.
The package of measures, which have been agreed with the credit card and store card industry, gives consumers five rights:
• Right to repay: consumers' repayments will always be put against the highest rate of debt first. For consumers opening new accounts the minimum payment will always cover at least interest, fees and charges, plus 1% of the amount they have borrowed.
• Right to control: consumers will have the right to tell their providers never to increase their credit limit, and the right to reduce their limit at any time.
• Right to reject: consumers will be given 60 days to switch provider if informed of an increase in their interest rate, and will be able to reject the offer of any increase in their credit limit.
• Right to information: consumers at risk of financial difficulties will be given guidance on the consequences of paying back too little; and all consumers will be given clear information on increases in their interest rate or their credit limit including the right to reject.
• Right to compare: consumers will have an annual statement that allows for easy cost comparison with other providers.
In addition, the government said it would protect consumers who were at risk of financial difficulties by banning card providers from increasing their credit limit or interest rate, and allow consumers to access their credit records for free or just £2.
Brown said: "Step by step we are reinventing the financial services industry after the global financial crisis and moving the balance of power back towards consumers.
"These new rights will put an end to the irresponsible lending practices that people have been most concerned about, and help cut the cost of borrowing."
Positive order of payments
The changes follow the Credit and Store Card Review launched by the government last year. It received responses from more than 5,000 members of the public, as well as receiving input from all the country's card issuers and a number of consumer bodies.
A government spokesman said it became clear from the responses that the majority of cardholders were not aware they were being made to pay off their cheaper debts first. When they understood the issue, he said, it was the area in the review they were most keen to see changed.
Nationwide and Saga are the only two card issuers that do not use an adverse order of payments system. Other credit card firms are expected to be given until the end of 2010 to change their system.
Nationwide's product and marketing director, Chris Rhodes, said: "This review is excellent news for the consumer. A positive order of payments would mean that consumers can trust that when they make a payment it will go to paying off their most expensive balance first. That would be good news for anyone who cannot, or chooses not to, pay off their credit card debt in full."
Melanie Johnson, chair of the UK Cards Association, said: "We are pleased that our evidence on unsolicited credit limit increases and the repricing of existing debt has conclusively shown that existing practices do not need to be overhauled.
"We believe that, overall, the outcome of the review is balanced and will give consumers the greater control and convenience that the industry and the government wish to provide."
She added: "Now that we have agreement in place we can focus on the important task of implementing these changes so that customers can benefit."
However, the association said the changes were likely to cost the industry around £533m over the first two years – double the cost of the package of proposals it had put to the government.
This could mean some providers consider introducing annual fees to recoup these losses.
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