’12-year high for credit card interest rates’

March 26, 2010 at 1:42 pm

If you regularly pay for goods using a credit card, you’ll now find the interest rates at their highest for 12 years. This is according to Moneyfacts, which carried out research into credit card rates over the past few years.

Credit card users now have to put up with an average interest rate of 18.8%. In comparison, just four years ago this was as low as 14.8%.

This comes despite the Bank of England keeping the base interest rate at the super-low level of 0.5% for months now. Indeed, the BBC reported that the Bank of England disagrees with the 12-year high claim, instead claiming that rates are only at a three-year high. However, different factors were used to come to this conclusion.

Whatever the exact facts, the figures speak for themselves. One reason for the high rates is the high level of unemployment at the moment. The argument is that the higher the unemployment level, the likelihood of borrowers failing to pay off their debt increases.

This fear is backed up by the increase in ‘write-offs’ recently. This is where the banks accept that they are never going to receive the money they lent to borrowers. In the third quarter of 2009, write-offs doubled to £1.6 billion compared to £800 million for the previous two quarters.

The worst affected are going to be people who use their credit cards on a regular basis and who only pay off the minimum amount each month. Doing this will see the interest rate causing your debt to rocket and it’s a practice best avoided.

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‘Staff ‘need bonuses,’ says RBS chief’

March 19, 2010 at 4:10 pm

The Royal Bank of Scotland (RBS) accrued debts of over £3.6bn in 2009, yet the bank retains one of the most lucrative bonus schemes in the world.

Branded an ‘immoral bonanza’ by the Daily Mail, the bank’s bonus fund is one of the most controversial aspects of UK finance, with both taxpayers and financial gurus taking umbrage with the multi-million pound payouts.

Last year, whilst RBS was accepting handouts from Gordon Brown, almost 17,000 investment bankers took home a share of £1.3bn. In comparison, Lloyds bank has earmarked just £200m for its bonus scheme.

Barclays, one of the most successful banks in England, is ready to hand out almost £3bn to its favourite employees, but after surviving the recession unscathed, and then posting a massive 92% boost in operating profit, the bank has not drawn the same kind of criticism as RBS, which owes its survival to the taxpayer.

Stephen Hester and Bob Diamond, the puppet masters behind RBS and Barclays, respectively, have both turned down six-figure bonuses in recent weeks, as public scrutiny into UK banks continues to make the headlines.

Mr. Hester remains a vocal proponent of reward schemes, however, blaming the loss of staff to companies with deeper pockets. The RBS boss believes that as much as £1bn could have been scraped from the bank’s debts if those staff members hadn’t defected.

Vince Cable, a spokesperson for the Liberal Democrats, was unimpressed with the RBS bonus scheme – "RBS rewarding individual bankers is like a football team paying their striker for scoring when they’ve just been relegated."

Experts predict that RBS will return to profit next year.

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‘Massive profit boost at Barclays’

March 12, 2010 at 2:14 pm

Barclays’s profit for 2009 was £11.6 billion, an impressive 92% boost from the previous year. The rise was spearheaded by the bank’s credit card and investment departments, and bolstered by the sale of BGI (Barclays Global Investors) to the US firm Blackrock.

Company bosses, such as current president Bob Diamond, have also snubbed multi-million pound bonuses for the second year running in a bid to soothe public unrest and regain the trust of customers. However, bonuses of £2.7 billion have been earmarked for other employees, working out as approximately £191,000 per head.

The bank was one of the few banking institutions to escape the recession with little more than skinned knees, and has none of the crippling debts that mar the books of HBOS and the Royal Bank of Scotland.

Barclays’s commercial division earned £749 million in 2009, closely followed by high street and retail banking with £612 million. Barclaycard was in third place, bringing in £761 million by the end of the year, whilst investment banking and the sale of BGI earned £2.46 billion and £6.33 billion respectively.

Experts believe that Barclays ‘bought off’ the recession with funds scurried away in rich sultanates in the Middle East. Since then, the bank has given out £35 billion in loans to British households and businesses, three times what it expected to lend by April 2010.

Many people have been vocal in their praise for Barclays, with a spokesperson for Hargreaves Lansdown stockbrokers saying that its year-end results "are proof that the bank has skilfully woven its way through the recessionary minefield,” calling the figures "extremely impressive”.

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‘Credit Unions – An alternative approach to saving’

March 5, 2010 at 1:58 pm

Ever since the recession began, the public has been falling out of love with banks. Barclays’ recent announcement of £11.2 billion profits has once again brought the various issues with the conduct and profitability of banks to the forefront of public conscience. But what can you do if you are tired of giving banks your money, tired of huge banking bonuses and ultimately wish to burn your bridges with the entire banking sector? Join a credit union.

What is a Credit Union?

Credit Unions are locally run organisations where customers can save and take loans. Because they are a co-operative organisation, anyone who chooses to put money into a savings account effectively owns part of the business. Therefore, unlike banks any profits made from loans’ interest and joining fees is paid back to members in the form of dividends. Instead of using the money you save in investment banking, Credit Unions use it to offer low fixed interest loans to their savers who are in need. Since all the customers are members of your community this means that your money is being used to help improve the livelihood of people in poverty on a local level. Credit Unions are also regulated by the FSA (Financial Services Authority) and as such, the safety of your savings is guaranteed.

When a customer wishes to take out a loan there are no fees, nor is there a minimum loan amount and any issues which arise with payment can be discussed and a flexible solution which suits the customer can be found. There is also no penalty for early payment with interest calculated from the reducing balance of the loan.

The main downside to saving with a Credit Union is that you are unlikely to get high interest on your savings, although this does vary from each Credit Union to the next, with some now even offering ISAs (Individual Savings account). Another issue stems from the fact that each Credit Union is different and thus you can only withdraw money from your local one. This means it is still necessary to hold a current account with a bank or building society for your daily needs. In many cases one day’s notice is required to withdraw any large amount, meaning you may not be able to get hold of your money exactly when you need it.

On the whole though, Credit Unions provide a refreshing, ethical and community led approach to savings and loans and with more and more people becoming increasingly disillusioned with banks, they could be a force to be reckoned with in years to come.

For more information on where to find your local Credit Union and which services it offers see:

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