Why your Christmas debts could last until 2023

Consumers could end up paying for Christmas 2011 far into 2023 by making only the minimum repayments on their credit card.

Clearing a balance can take years if you make only the minimum repayment each month 

With just two months to go until Christmas, many people may be tempted to fund this year's festive spending on their credit card.

However, figures from Moneysupermarket.com show that consumers with a balance of £500 on a card with an average APR of 18.12pc could take 11 years and eight months to clear their debt if they make only the minimum repayment of 2.5pc each month – forking out an extra £477 in interest payments in the process.

Kevin Mountford, head of banking at moneysupermarket, said: "It's no surprise that a number of people will dread funding Christmas this year, with the rising cost of living, and energy, fuel and food costs all squeezing people's wallets over the past 12 months. The festive period is an expensive time of year and many may be thinking about using their flexible friend to tide them over this season."

According to figures from the Bank of England, consumers have racked up a £57bn bill from credit cards but increased competition in the market will give many borrowers time. For instance, credit cards from Tesco Clubcard and M&S Money are interest-free for 15 months on purchases.

For those consumers able to pay off their balance in full each every month, a cashback or rewards card could be a good option as it gives them rewards each time they spend.

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The American Express Platinum Cashback credit card, for instance, offers up to 2.5pc cashback for the first three months up to a maximum of £100, followed by an ongoing cashback rate of 1.25pc.

A balance transfer war has broken out and some card providers allow people to transfer existing debts and pay 0pc for up to 22 months, subject to a small handling fee. Once this period is up you need to repay the debt or transfer it again – otherwise you risk paying a high interest rate.

However, shoppers should avoid using a interest-free balance transfer card for their shopping as these cards are designed for transferring existing debt and, despite many having zero per cent offers for purchases, these offers last only for a few months before purchases accrue interest at the standard rate.

The best cards for balance transfers are Halifax's Balance Transfer MasterCard and Barclaycard Platinum Extended BT Visa, which both charge 0pc for 22 months.

"Setting up a direct debit for credit card repayments is essential - consumers should avoid missing payments at all costs, as this would lose them their promotional offer," said Mr Mountford.

"The decision to use a credit card shouldn't be taken lightly and careful budgeting is essential to ensure people can pay off their Christmas debt quickly, and within the next 12 months, or, as our findings show, they could be left paying for Christmas 2011 for many years to come."

By The Telegraph 

Financial Services Authority target packaged account sales

Banks and building societies are coming under fire from the Financial Services Authority (FSA) over concerns that fee-based current accounts are being mis-sold to millions of customers.

Financial Services Authority target packaged account sales 

The FSA has proposed new rules to ensure customers are eligible to claim on insurance cover before sold a packaged bank account, which can cost up to £300 a year.

Packaged accounts are current accounts that charge a monthly fee but come with extras such as free roadside recovery cover and ID theft protection.

It is estimated that one in five of the UK adult population now has one of these accounts. However, research from consumer group Which? has found that a third of consumers do not use the extras for which they are paying, wasting between £240m and £320m a year.

Under the proposals the banks and building societies selling insurance as part of a packaged account must check customer eligibility to claim when purchasing as well as provide an annual statement to review suitability. Sales advisers will be required to establish whether each policy is suitable for the customer and notify them if not.

Sheila Nicoll director of policy at the FSA, said: “We want to make sure that packaged accounts are only being sold to customers who have actively decided it is the right product for them.”

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The FSA is also investigating how to improve price transparency of this type of account. The regulator highlighted that it can be difficult for customers to compare and contrast the costs with stand-alone insurance products or other bank accounts.

The number of packaged current accounts available to consumers has doubled in the last five years

According to statisticians Defaqto, there are now more packaged accounts available than free in-credit accounts. Further, the average monthly fee for a packaged account now ranges between £6.50 to £40.

Richard Lloyd, executive director at Which?, said: “People should only have a packaged account if they’re absolutely certain that it will be cheaper for them and they’ll use all of the benefits offered. Banks have a responsibility to make packaged accounts more transparent by clearly explaining what each of the individual elements are worth, so customers can compare.”

By the Telegraph 

How to save £20,000 on your mortgage

How? By switching a small part of your debt to a cheap personal loan.

Lenders should let you use a personal loan to boost a deposit. 'But you need some skin in the game,’ said one expert 

Home owners can save hundreds of pounds a year by switching some of their mortgage borrowing to cheap personal loans – and reduce their overall debt by thousands of pounds at the same time.

Personal loan rates have been falling – the cheapest is now 6.3pc – as lenders engage in a price war. Some mortgages actually cost more than these cheap personal loans. But even if you are not paying such a high rate on your current mortgage, you could still save by transferring some of your debt to a personal loan.

This is how it works. If you want to remortgage or buy a home, you take out a personal loan for, say, 10pc of the property price, which means your mortgage will be a smaller proportion of the cost of your home. This will often qualify you for a better rate, as mortgage interest rates are very sensitive to what lenders call the “loan-to-value” (LTV) – your home loan amount as a percentage of the purchase price.

Imagine you want a lifetime tracker mortgage on a £300,000 property and have a 10pc (£30,000) deposit or equity. If you borrowed all £270,000 on a mortgage, your LTV would be 90pc. The best lifetime tracker at 90pc LTV, according to John Charcol, the mortgage broker, is from the HSBC and costs 4.59pc.But if you took out a personal loan of £15,000, you would need a mortgage of just £255,000, which is an LTV of 85pc. The best lifetime tracker at 85pc, which comes from First Direct, charges 3.69pc – 0.9 of a percentage point less than the HSBC mortgage.

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This makes a big difference to the repayments. Borrowing £270,000 at 4.59pc over 25 years would cost £1,531 a month, according to Ray Boulger of John Charcol. A home loan of £255,000 at 3.69pc would be £1,316 a month.

You have to add the repayments on the personal loan to this amount, of course. Consumers can borrow £15,000 for 10 years on an unsecured personal loan at a rate of 6.4pc (personal loans always charge fixed rates). The monthly repayments on this loan would be £168. The total cost of borrowing £270,000 via a £15,000 personal loan and a £255,000 mortgage is therefore £1,484 – a saving of £47 a month, or £564 a year.

Using a personal loan can also save money if you want the certainty of a fixed-rate mortgage. Using the same example of a £300,000 property and a 10pc deposit, the best five-year fix at 90pc LTV comes from the Post Office and charges 4.99pc, meaning a monthly cost of £1,595. Borrowing £15,000 on a personal loan would qualify you for an 85pc LTV mortgage; the best five-year fix here is Yorkshire Building Society’s deal at 4.24pc. This is an improvement of 0.75 of a percentage point and the monthly cost is £1,395.

Add the cost of the personal loan and the total monthly repayment comes to £1,563, which is £32 a month or £384 a year cheaper than borrowing the whole sum with a mortgage.

Better still is the effect on your total debt when the personal loan is paid off. Assuming that you can fix for the second five years at the same rate as for the first five, your outstanding debt if you borrowed the whole £270,000 on a mortgage would be £198,800 after 10 years, Mr Boulger calculated. But the remaining debt if you used a mortgage plus personal loan would be just £183,000.

So, after 10 years, the benefit of using the personal loan is £15,800 off the outstanding debt and £3,840 less in monthly repayments – a combined sum of £19,640.

Clearly, using personal loans makes sense on paper. But would you actually qualify for the loans and mortgages you would need to make it work in practice?

“Many mortgage lenders won’t mind you using a personal loan as part of your deposit, although a few will,” Mr Boulger said. “However, you must be honest about it from the start. Lenders will see any loan applications on your credit file and some recheck just before they release the money, so you wouldn’t avoid detection by getting the mortgage approved first.”

It is also important to have saved up at least some of the deposit yourself, Mr Boulger said. “Lenders are very keen for you to have some skin in the game – at least 5pc of the purchase price should be from your own money.”

Personal loan providers, meanwhile, should not object, Mr Boulger said. He pointed out that lenders might increase rates at the £15,000 level, so check the rate you are offered at £14,999 as well. You will need a top-notch credit history to qualify for the best personal loan rates and the cheapest mortgage deals.

“The best personal loan will depend on the amount borrowed,” Michelle Slade of Moneyfacts said. “A lender may be competitive in one tier, but not necessarily in another.” David Black of Defaqto, the data provider, said: “The keenest rates for unsecured loans tend to be for between £7,500 and £15,000. It is difficult to get an unsecured loan above £25,000.”

There’s yet another advantage to using a personal loan for some of your borrowing: the early repayment charges (ERCs) are normally much lower. Borrowers with the Post Office mortgage mentioned above, for example, will pay 5pc of the original amount borrowed if they pay the loan off early; the cost of redeeming a personal loan early, by contrast, is normally just one month’s interest.

By The Telegraph

Why it can take 22 years to pay off your credit card

David Cameron this afternoon said households were paying off their personal debts to help Britain recover from what is "no normal recession", but for those who opt for the minimum repayment, it could be 2033 before they clear their balances.

Credit card debts take decades to clear 

The Prime Minister told delegates at the Conservative Party conference today that the country has been suffering from a debt crisis and "that's why households are paying down their credit card and store card bills".

It certainly makes sense to pay down your debts if you are in a position to do so. Figures from Moneynet.co.uk have revealed that should consumers with a credit card balance of £2,000, who repay just the bare minimum amount each month, 22 years to clear the balance of just £2,000 – paying an extra £2,275 in interest in doing so.

If a borrower with a £2,000 debt makes monthly repayments of £50 it will still take in four year and 11 months to pay down the debt, at an interest cost of £939.

It would take 28 years and three months to repay a £5,000 card debt repaying the minimum each month. You would pay £5,912 in interest.

According to figures from the Bank of England, consumers have racked up a £57bn bill from credit cards but increased competition in the market will give many borrowers time.

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A balance transfer war has broken out and some card providers allow people to transfer existing debts and pay 0pc for up to 22 months, subject to a small handling fee. Once this period is up you need to repay the debt or transfer it again – otherwise you risk paying a high interest rate.

Michelle Slade at Moneyfacts said that assuming you can pay the debt off within the introductory period, moving the debt to a interest-free balance transfer card is a useful option. "If customers do this then they have to be disciplined and repay as much as possible each month. If they don't, then the interest could soon start stacking up again one the introductory deal ends."

The best long-term interest-free deals come from Barclaycard Platinum, which charges 0pc for 22 months with a 2.90pc balance transfer fee. Similarly, Halifax's BT MasterCard, is also interest free for 22 months, but charges a 3.5pc fee on transfers while Virgin Money has an interest-free period of 20 months and charges a fee of 2.99pc.

Personal loans are also a good method for debt consolidation as they offer a structured repayment plan. With this option, borrowers know exactly what they will have to repay each month and when they will be debt free – assuming they do not take out further borrowing.

Since the start of the year the personal loan market has been highly competitive, particularly on the £7,500 to £15,000 tier. The increased competitiveness has seen rates on some tiers tumble back to the levels saw before the credit crisis.

Depending on the size of your loan, rates may vary. If you are looking for a loan of £2,500, the best rate comes from the Post Office and charges 14.9pc. Sainsbury's Finance charges 7.9pc for a loan of £5,000 while HSBC, Marks & Spencer Money and Nationwide Building Society all charge 6.4pc APR for a £10,000 advance.

Andrew Hagger, spokesman from Moneynet.co.uk, highlighted that those who go down this route should ensure they close down the credit card accounts that are being repaid with the new loan – otherwise they start spending on them again and fall further into debt.

However, Ms Slade, pointed out that lenders are very strict about who they will offer a personal loan and those without a good credit record are unlikely to be accepted.

She said: "Lenders will look at how much existing debt someone has and may not offer a loan if its is already too high. A debt consolidation loan is only likely to be offered to someone with a small amount of debt, who has not had any previous repayment problems. Anyone else is likely to be declined by traditional lenders."

Apple unveils refreshed iPhone 4S, but no iPhone 5

The iPhone 4S, as the model will be known, boasts an improved camera and significantly extended battery life.

It will run the latest iOS5 operating system, which is set for release on 12 October.

The event was the first major announcement for new boss Tim Cook who took over from Steve Jobs in August.

The iPhone 4S, which will go on sale on 14 October, will be available in 16GB, 32GB and 64GB models - in both black and white.

It has the same look and feel as the existing iPhone 4 which was launched 15 months ago.

However, Apple said that updates to iOS meant the phone would boast some "200 new features".

Continue reading the main story

Apple Inc.

LAST UPDATED AT 04 OCT 2011, 21:01

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Shares in Apple fell by almost 5% within minutes of the eagerly anticipated launch, with analysts saying that investors and Apple fans had expected the latest version to be a more radical improvement over its predecessor.

However, the company's shares later regained most of their losses to close down just 0.6%, albeit underperforming the NASDAQ index as a whole.

Voice control

Among the additions is an "intelligent assistant" that allows users to ask questions aloud and receive detailed answers back.

Siri, which began life as a third-party app, was purchased by Apple in 2010 but has yet to appear within its software.

Luke Peters, editor of gadget magazine T3, said that the software announcements would do just enough to keep Apple fans interested in the face of strong challenges from rival smartphone manufacturers.

Continue reading the main story

hardware would leave many people underwhelmed.

"It was quite disappointing. I think there is going to be a lot of anger from users expecting something big bold and quite exciting after a long time of waiting from the iPhone 4.

"People will buy this in their droves, but Apple has missed a trick by just releasing the exact same phone again with marginally upgraded specs."

             see the video 

For Apple's new chief executive, the event was as much about making a statement about his leadership as it was new products.

Tim Cook had previously acted as interim boss, looking after the company while Steve Jobs was on sick leave.

Unlike his charismatic predecessor, Mr Cook left the biggest announcement of Tuesday's event to a colleague - marketing boss Phil Schiller.

"Maybe he wants to bring other people to the forefront by letting others speak on his behalf," said Gregory Roekens, chief technology officer at marketing firm Wunderman.

"But in terms of style, it was underwhelming. People were expecting iPhone 5, but instead it's almost fixing the weaknesses the previous phones had.

"It will be interesting to see how people react to that.

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Apple expected to launch new iPhone today

Apple is expected to launch its latest iPhone this evening at an event in San Francisco.

Image 1 of 2

Once again, Apple has kept its new product secret. 

The fifth version of the enormously popular Apple handset could be called the iPhone 5 or the iPhone 4S but observers are agreed that it will feature a faster processor - the same A5 processor that powers Apple's iPad 2 - and a better camera.

The new handset will also run iOS 5, the latest version of Apple's operating system for iPhone, iPad and iPod touch. Apple unveiled iOS 5 at its Worldwide Developers Conference in San Francisco in June but rumour has it the new phone will add a voice control system.

The event, which Apple's invite headlined 'Let's talk iPhone, is expected to be led by Tim Cook, Apple's new chief executive. Mr Cook has recently taken over the role from Steve Jobs, who resigned for health reasons in August.

This will be Mr Cook's first event as Apple CEO and his performance will be scrutinised by observers who will be eager to discover whether he can match the charisma of Mr Jobs.

Launched in 2007, the iPhone is now Apple's most successful product. More than 20 million iPhones were sold in the second quarter of this year, despite the approaching update. Apple has typically launched its new iPhone in June but this year's release was delayed for reasons that have not been explained.

Fact

Heart Finance is one of the UK’s leading independent finance broker which was founded to search the entire market in order to help you find the best deal you possibly can.

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Example of deal: 

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Apple typically holds an iPod-related event in the autumn. This year, the iPhone will be the focus of attention but there is also speculation about the future of the iPod. The MP3 player turns 10 this month and rumours suggest that Apple might be planning to 'retire' the iPod Classic

by the Telegraph