Many people like the buy now pay later ideals of a credit card, and retailers are being forced into accepting them because the retail trends are this way.  If people are going to want to pay with debit cards and credit then the merchants have to comply or they go out of business; this is true people power in action.

So this is a really good time to make sure you can get hold of a credit card.  Most people have debit cards these days, it’s just those that want to pay with credit that need to get themselves sorted soon.  There is a certain freedom afforded to you by paying your bill every month and not worrying about paying as you go along.  There is also the added bonus that if you pay for things on your credit card you can claim reward points for all your purchases!

Of course people need good sound financial education, but where are they going to get it?  It will probably be offered by a large bank or other financial institution that have other motives that are not so benevolent.  I can see it now, free financial advice for youngsters against getting into debt with loans and credit cards, from your friendly bank Lloyds, or HSBC or some other self serving institution.

Financial eduaction needs to begin in the family and needs to be taught by responsible parents.  This is simply because if you bring your children in an envirnoment where the credit card is used to get people out of trouble at the very first instance and the concept of saving money is completely lost, then there is no amount of schooling or specialist training that will prepare the children for what they have in store for them from the real world.

We all have to be resposible now and begin to educate the young ourselves; we should begin by leading by example.

Although the figures are from BArclaycard, i don’t suppose they have anything much to gain by lying to us.  They show us that there has been  9% increase since this time last year in credit card spending.  This has to be good news.

What can this mean?  Well, it depends on where you stand really.  Many people are saying that the rise in credit card spending is a natural process that people go through that shows a recovery from Christmas expenses.  However, this would signify a more “back to normal figures” in my opinion, since the rise is compared with last year, not before Christmas.

So we don’t need to look at it from the Nay sayers!  We must embrace the rise in credit card speding as an indication that the economy is truly recovering.  It may be recovering slowly, but quite frankly i’d prefer a slowly recovering economy any day.  This way people’s confidence in things like credit card spending will be greatly sustained.  If there was a sudden boost i think people would remain wary!

There are also new rules regarding your credit card repayments.  Now you won’t be able to pay the standard minimum payment, which to be fair was a fraction of what you actually owed the credit card company.  There are rules now in place that will expect you to pay a greater minimum payment in order to help you get your debts paid off quicker and more efficiently.

The other thing that is great about this, other than helping you pay off your debt quicker, is tha fact that having larger minimum payments is likely to prevent people spending too much money on their credit card, due simply to the minimum payment.  This rule is likely to put in perspective the reality of your credit card spending before it becomes something you cannot pay!

But by far the most sensible factor about increasing these payments is that the minimum payment will be required to be at least more than the interest on the balance.  This makes much more sense and doesn’t allow the credit card to spiral out of control.  If you’re minimum payment is more than the interest then at least every payment is going off the balance of your credit card.

Before a credit card company could “reward” you for paying off your credit card balance in a timely fashion without any problems, and this reward was in the form of a bigger credit card limit.  Now they can’t do that.  Before you lament this just think about it for a moment.  Anyone who had a credit card in the past will tell you just how tempting it is to spend more money when you have a larger limit.  You might say that it’s up to the credit card user, but i and many others would argue that it is the responsibility of the credit card companies not to put this sort of temptation in your way.

Well they are no longer allowed to do this.  In fact when you apply for your credit card you have the option of never having your limit increased without your consent, which makes a lot more sense these days; particularly in today’s financial climate.  The new rules also allow you to reduce your own credit limit whenever you like, providing your balance falls below this of course!

These steps allow the customer to take a much greater control of their own finances and allow the sensible credit card user to borrow only what they can repay.

These rules are obviously in the wake of our country’s economical crisis and the rate in which lending has gone out of proportion.  Well there will be no more of that with any luck, according to the government in any case.  The first one of these rules is that the credit card company can no longer choose to pay off the cheapest of your debts with your minimum payment.  This is a trick they have long been playing that allows them to only take your payment off the purchases that don’t generate a great amount of interest (thus revenue) for the credit card company.  This will make it much easier for many of us credit card users and this change has been long awaited.

Another change is that you will have a longer period of time to reject interest rate changes on your credit card.  If your credit card company writes to you to let you know they are increasing their rate, you now have up to 60 days to reject the rates and have your card cancelled.  When your card is cancelled you will only pay off the balance at the original interest rate you had before the company’s increase.

It isn’t just the new credit card applicants that are being hit by price rises, existing credit card holders have also seen a jump in their interest rates (the ones they had once though quite safe.)  thought they were safe are also seeing huge jumps in their rates.

Credit card companies are quick to blame the government for all their problems, due to increasing unemployment which inevitably leads to people unable to pay their credit card balances.  So this has cause credit card companies to look for applicants who have a better credit “score” in order to continue business.  But because of the lack of these people too the credit card companies have been forced to up the interest rates too.

Have you noticed that nowhere in this equation has anyone mentioned anything about profit?  That’s because it’s taken as normal that the credit card company should still be making masses of profit.  Perhaps they should lower interest rates as well as lend responsibly and then we might not be in such a mess anyway?  If they too tightened their belts a little more the country could work it’s way out of this.

The real problems begin when there is a slight dent in the family unit, when perhaps someone loses their job, or there is an unexpected purchase or perhaps an illness that there is no insurane to cover.  The moment that you adjust the delicate financial balance of a modern day family’s income there is bound to be trouble.

There is more trouble where this is concerned because those who live their lives like this cannot remember how to do anything else.  The credit card can become their life and they work to pay the minimum amount each month.  Now, when something like what i mentioned earlier happens, like the loss of a job or an expensive purchase is required, what these families often do is apply for credit and over estimate their earnings and expenditure in order to obtain it.  This is simply ridiculous and living beyond what they can actually afford.

There are quite literally billions of pounds owed by people like this to credit card companies, and yet the credit companies will continue to allow people to spend money in this way.  My conclusion is that they cannot seriously be losing that much money from these people who fail to pay their bills; you could never bankrupt a credit card company!

Watch out for your spending folks and try not to become a slave to the credit card.

In our opinion it doesn’t help much, but at least it’s a start.  When you’re bombarded by more and more credit it’s sometimes difficult to stay out of your new limits.  These new steps will stop all of this happening, and hopefully save customers an estimated £300 million a year.

Having a low credit limit is a good thing, and it exists for the purpose of limiting your spending.  Some credit card companies can get a little silly about raising credit limits automatically without reviewing individual cases.  Someone who has borrowed a lot and managed to pay it back will usually get upgraded to a larger credit limit, but this person may have lost their job recently or they may have only been able to pay off their bill with the funds from another card; investigations and recommendations should be sought when raising the limit on anyone’s credit card.

The next logical step in our opinion would be to raise the minimum payments on credit cards too.  This way you will be able to identify people who cannot afford the payments much sooner, before there is a problem and before the debt is too larger to manage.  Not only that, but people who are required to pay more back each month are less likely to spend as much on their card.  But i suppose one of the most important reasons for raising the minimum is so that the card holder can stands a chance of actually paying back their borrowings.  On average, a person with £5,000 debt who pays only the minimum amount will actually end up repaying an extra £2,289 with the interest added.

A credit card cheque is basically a ordinary cheque but one that draws its funds from your credit card.  They were origanally designed to just off an alternative form of payment for customers who had credit cards.  Sadly they were often stacked with more interest than regular credit card purchases and credit card companies were accused of simply creating more gimmicks to make more money; personally i agree.

It’s a welcome change from MBNA because these interest charges will of course no longer apply.  The credit card cheques often come with a handling fee too, and they do not offer the same interest free periods as the credit cards themselves do.  Customers are often “tricked” as it were, into using the cheques out of convenience and then suffering the consequences of their actions at a later date.

The credit card cheques will stop circulation on 31st March 2010 and will only be available to credit card customers who personally request them.  Thankfully there will be no more “free” cheques being sent through the mail with your credit card statement to entice you to spend more money you don’t have in a different way!