Make 2009 your Debt Free Year
Introduction
Debt Management - Based on my own experiences and research, you will find tips on budgeting and managing your debts, analysing your current financial position, using a snowballing approach to substantially reduce your credit card debts, as well as help in answering that all important question, should you consolidate the debts that you have? You will find links on the left, as well as on my other pages, to sites that can help in resolving your debt and finance related problems.
Debts are always a problem, particularly for the person who has large debts outstanding on high interest credit cards. It is always advisable to include those close to you in any plans you may have for reaching a solution, they can help you to keep on track as well as support you through this difficult time.
Once you have browsed the pages on this site, and some of the other pages that are linked from this site, you may wish to consolidate your debts, take further advice, remortgage your property, or resolve your problems by some other means. The links from this site can assist you in achieving many of these goals.
If you are not confident when it comes to understanding and working with financial matters, a good starting point is the Moneymadeclear site maintained by the Financial Services Authority (FSA). Here you will find a wealth of impartial information and tools that can help you work out and understand what is right for you, there is no selling, no jargon, just the facts.
On the Moneymadeclear site you will find:
- Step-by-step guides
- Tools and calculators
- Useful contacts
- Comparison tables
- Jargon made clear
- Scams and swindles to be aware of
Moneymadeclear is there to help people with their money and is well worth visiting.
Martin Lewis's site moneysavingexpert.com is also worth visiting for information, assistance, tools and saving advice, in fact most things financial. You will find links to his site dotted all over these pages.
Credit Cards - credit cards can prove to be the start of debt troubles, however, properly used they can also enable people to deal with debts that have accrued, in particular the transfer from high interest cards to 0% and/or low interest cards can help to repay debts more effectively, particularly when combined with a snowball approach. There are a number of sites that will help you to find the most appropriate credit card, these include Compare UK Credit Cards and Motley Fool.
Credit cards are a very popular way of managing money, giving flexibility and sometimes, with the use of 0% interest, a means of reducing debt. Unfortunately many people do not understand the systems of repayment currently in use by many card suppliers and this can have an adverse effect on that person's financial wellbeing.
New research shows that more than 60% of card users are still unaware that using only one credit card for spending and clearing debts does not give the best options, this is due to the negative payment hierarchy imposed by most card issuers when dealing with money owed on a card that attracts more than one rate of interest.
The majority of credit card providers use the negative payment hierarchy to clear money owed on their cards, this means that any balance transfer will be seen by the provider as separate to any purchases or cash withdrawals made and will be paid off first, this then leaves purchases and cash withdrawals unpaid which are the most expensive regarding interest charges.
Put simply, this means that when a payment is made the money will not be used to pay off the debt as a whole. Instead, the provider will use the payment to clear the cheapest balance first, otherwise known as negative payment hierarchy.
What effect does this have on your finances?
Lets imagine that you have transferred £2000 debt from a previous card on a 0% offer and you have spent a further £300 that is charged at 17% if not paid off at the end of the month.
You decide to make a payment of £300 assuming this will clear your new purchases and leave the £2000 at 0% to be paid off at a later date, unfortunately this is not the case, the £300 will be taken off the part of the debt that carries the lowest interest charge, leaving you with £1700 still owing at 0% and £300 which will be charged at 17% interest.
Any further purchases will attract a charge of 17%. You will continue in this manner until you have paid off the 0% transfer, by which time you are likely to have built up a debt of over £1000 attracting an interest charge of 17%.
Research from moneysupermarket.com shows that just 34% of consumers expect providers to pay off their cheapest debt first, even though the majority of card issuers operate the negative payment hierarchy and inform card users of this fact.
The only providers currently not using negative payment hierarchy are Nationwide and Saga and by using one of their cards to pay off an outstanding debt could save the average card user hundreds of pounds over the life of the debt.
If you choose not to use one of these two providers offering a positive payment hierarchy, you should consider using one credit card to clear your balance transfer and another to make new purchases.
If you are able to pay off your balance within a reasonable time period, then a 0% balance transfer card is probably your best bet but do remember that you will need a good credit history in order to qualify for this type of card and most cards charge a transfer fee, normally around 3%.
Illegal Bank Charges - Banks and building societies won a shock victory in the bank charges test case in November 2009 - yet the judge indicated there may be a tiny glimmer of hope. The Supreme Court overturned rulings in the High Court and Court of Appeal that bank charges were subject to fairness rules, under clause 6 of what's called the UTCCR regulations. However, it's now becoming clear the banks' victory isn't 100% clear cut. If you are considering claiming, or if you have a claim outstanding, please read the information on moneysavingexpert.com before doing anything else.
Legal Proceedings - If you do find yourself subject to court action, or you need to take court action yourself, you should visit Her Majesty's Courts Service where you can obtain all the information you will require.
Currency Converter - If like me you want to know what your spending money is worth when planning your holiday abroad, you should visit the XE-Universal Currency Converter site where you can perform currency and foreign exchange calculations using live, mid-market rates. The Universal Currency Converter contains the top 85 currencies, listing the top 10 first. Special units and precious metals are listed alphabetically and at the end.
OurProperty - Check the value of property in your area, or any area that you are interested in, this site contains up-to-date data on sold property prices from both the Land Registry of England and Wales, and the Registers of Scotland.
www.tak-coo.co.uk is dedicated to supporting people to:
- get their finances back in order;
- counteract the use of bully-boy tactics;
- understand and stand up for their rights;
- voice their opinions;
- obtain a fair and honest service;
- obtain compensation when it is due.
