Credit cards relied on in times of income instability

By UK CreditCards.com

Consumers facing sudden changes in their incomes often depend on credit cards, new analysis suggested.

Chris Tapp, director of financial charity Credit Action, said that the cards are used to "smooth out peaks and troughs" in personal income, which can be caused by life events such as being made redundant. He added that many Britons would continue to be dependent on credit card borrowing in future.

Evidence from the Bank of England suggests that the credit card sector is bearing up well, despite the pressures of the financial crisis and economic downturn.

Figures for September 2009 from the institution suggested that overall lending on the cards increased by £79bn.

Mr Tapp said: "We are not seeing significant amounts of growth at all when it comes to credit card lending, but it is performing slightly better than other types of consumer credit."

Unemployment has been rising in the UK throughout 2009. It hit a new 14-year high of almost 2.5m according to latest official figures from the government.

BIS unveils major credit card proposals

By UK CreditCards.com

The Department for Business, Innovation and Skills (BIS) has unveiled new plans to reform the UK credit card sector.

Restrictions on APR increases for customers with existing debts and bigger mandatory monthly repayments could both result from the adoption of the proposals. BIS said that the "order of payments" imposed by credit card providers could also change. This would see payments made by customers prioritised towards existing high-interest debts held on card balances. Currently, firms can pay off lower-interest debts first, meaning that the cardholder has more debt to repay over the long-term.

The BIS plans are now out for consultation, meaning that no concrete changes will be imposed immediately.

Responding to the news, The UK Cards Association said that it would be "reviewing the evidence" of the possible future impact of the changes.

"These proposals risk disadvantaging more customers than they protect," the group's chair Melanie Johnson said. However, the plans were welcomed by Consumer Focus, a customer advocacy group.

Spokeswoman Linda Weatherhead commented: "When every penny counts, these proposals are a very welcome step towards helping consumers get a fair deal."

Cash back cards can cut holiday costs

By UK CreditCards.com

Parents looking for a way to cut their holiday spending costs could consider using cash back credit cards, card issuer Egg suggests.

New figures from the credit card provider suggest that each family with children aged under 16 years old will spend an average of £15.12 per child for Halloween and a further £270 to keep their offspring entertained during the autumn half term holiday. Egg also found that 77 per cent of parents spend more than they can afford on their children over the half term.

The Christmas period, traditionally the biggest time of the year for shopping, is also set to increase this financial burden still further.

Vanessa Wood, an spokeswoman for the internet bank, said that consumers should "get creative with their spending" in order to lighten the load.

"A good way to get back some of the cost is to make the most of rewards and cashback schemes on credit cards," she added. Reward credit cards work by providing a financial incentive on credit card purchases, such as air miles, shop discounts and cashback. Generally, the levels of reward grow as the amount purchased on the card increases.

Budget for holiday spending with 0% credit cards

By UK CreditCards.com

Use of 0% credit cards can form a key part of festive spending strategies, a financial expert suggests.

Paul Lewis, a personal finance journalist and presenter of the BBC's Moneybox programme, suggested that shoppers can spread the cost of their Christmas expenditure by using credit cards with interest-free purchase periods.

Writing for Community Card, Mr Lewis said that applicants can take out a 0% credit card to fund their festive expenditure alone. They can then divide their balances by the amount of months that charge no interest on purchases when they plan their repayments.

Therefore, if a customer spends £900 on the card and the 0% period lasts for six months, then payments of only £150 a month are enough to wipe out the balance without any interest being charged. However, Mr Lewis also said that shoppers planning to use this strategy need to be disciplined.

"Do not use [the credit card] for day-to-day spending -- or treats for you," he advised.

'Mr Twitter' behind iPhone credit card system

By UK CreditCards.com

The founder of social networking site Twitter is thought to be behind an innovative iPhone credit card system currently on trial in the US.

Technology news source Engadget said that the Square iPhone Payment System, which allows credit card transactions to be made through the Apple device, was Jack Dorsey's secret "Squirrel" project that has been the subject of industry rumours over recent months.

The Twitter founder's role was discovered after an Engadget source noticed the name of a website, Squareup.com, in a picture of the Square system. This domain was registered with a contact email address from another site, paybysquirrel.com.

"The question is whether or not Dorsey and company can turn this fairly obscure piece of tech into the kind of firestorm which Twitter has become," Engadget added.

Square works through an iPhone app and a dongle device, which plugs into the phone's headphone jack. Cards are swiped through the dongle and payment details are then entered on the phone itself.

Customers also trace their signatures on to the dongle to confirm the transaction.

Bank reforms could hit credit card firms

By UK CreditCards.com

Major changes affecting UK credit card providers have been recommended by the governor of the Bank of England.

Mervyn King said that the current regulatory system, which allows large financial firms to maintain both retail banking and investment banking units, could be seen as "impractical."

If adopted, the reforms would see low-risk financial operations, such as high street banks providing savings and current accounts and credit cards, run as separate entities to investment banks trading in high-risk financial products.

The Bank governor added that financial firms that had received bailout money from the government due to the credit crunch should also limit their exposure to risky investments.

"It is important that banks in receipt of public support are not encouraged to try to earn their way out of that support by resuming the very activities that got them into trouble in the first place," he said.

Responding, Angela Knight of the British Bankers' Association said that firms offering "mixed banking" should not be broken up. "We believe the key issue is not one of breaking up banks but of financing the economy," she said.

Mr King made the comments in a speech in Edinburgh on Oct. 20.

Call centres criticised for credit card policy

By UK CreditCards.com

UK call centres are keeping hold of recordings containing customers' credit card details, contrary to payments industry guidelines.

This is the key finding of new research from call recording firm Veritape, conducted to mark National ID Fraud Prevention week.

According to a poll of 133 call centres conducted by the firm, over 95% of those call centres that store customer transaction conversations are not deleting mentions of credit card details.

PCI DSS, a global security standard developed by payments firms, states that this sensitive information should not be kept.

Moreover, 61% of call centres told Veritape that they were not aware of these guidelines and 18% said that they were aware, but would not comply because of "technical or budgetary reasons." Another 11% were aware of the guidelines but were choosing not to follow them.

"What we have is a global industry standard that is routinely ignored by call centres throughout the UK," Cameron Ross, Veritape managing director, said.

"Hardware and software interventions are available that automatically delete credit card data from audio recordings."

Records of credit card-related conversations from call centres are highly useful to fraudsters, who can use the details to access accounts and steal money.

New credit card laws effective Nov. 1

By UK CreditCards.com

Advice on the upcoming entry of the EU Payment Services Directive (PSD) into UK law has been published by the Payments Council.

The industry group has provided a guidance document for firms affected by the change, including credit card providers.

A publication aimed at improving consumer awareness about the changes is also currently being prepared.

The PSD will become legally binding in the UK through the Payment Services Regulations (PSRs).

Originally, the rules were aimed to increase the harmonisation of payment regulations across all EU member states, as well as making the industry more competitive.

Commenting on the new guidance, Rosalind Sellers at the Payments Council said: "Lots of us as personal customers have been receiving revised copies of terms and conditions for our different payment accounts and this is all to ensure [the firms] comply with these new requirements. We've focussed on a number of specific requirements where we could add value with practical guidance."

As well as credit cards, personal loans and debit cards will also be affected by the PSR changes, which come into effect on November 1.

Debtors urged to get credit card advice

By UK CreditCards.com

Using free advice services can help people avoid serious fallout from their credit card debts, an October 12 report showed.

Several case studies were brought together by organisations including Citizens Advice, Youth Access and the Law Centres Federation to mark the beginning of Advice Week 2009, which runs until October 18.

In a statement accompanying the report, the groups said that the earlier a debtor got in touch, the more advisers could do to alleviate the problems.

Citizens Advice put forward the case study of a Derbyshire resident who shared his money concerns with his local branch after being made redundant. The organisation guided him through voluntary bankruptcy and helped to secure him a £2,000 grant from the Royal British Legion.

David Harker, chief executive of Citizens Advice, said: "Even people at crisis point -- for example people facing a court hearing for repossession of their home -- can find their situation swiftly improved if they seek advice."

Latest data from the Bank of England shows that Britons made net repayments of consumer credit worth around £100m over August 2009. This includes money owed on credit cards and personal loans.

Credit card customers warned over dazzling teeth scam

By UK CreditCards.com

Users of Facebook should avoid a teeth whitening programme known as Dazzling White Teeth, a technology blog has advised.

TheNextWeb.com said that it had seen several reports of unhappy customers suffering unexpected withdrawals from their credit card accounts after signing up for the service.

Dazzling White Teeth asks customers to provide their credit card details when they order the product.

It then sends the teeth whiteners as promised, but also orders a series of additional products without asking the customer first.

Adverts for the service have been spotted on Facebook's advertising platform, leading to fears that the scam could have already reached a very wide audience.

"If you have already purchased [the] product and notice unusual charges on your credit card or bank account, then please give your bank or credit card provider a phone call," TheNextWeb.com advised.

The report added that users of the social networking site should report the adverts "straight away" when they see them.

Psychiatrists weigh in on credit card, loan debt

By UK CreditCards.com

A large overlap between people with mental health problems and people with money worries has been revealed by psychiatrists.

In a new report, The Royal College of Psychiatrists suggested that as many as one in two people in credit card, loan or mortgage debt might also have some form of mental disorder.

Additionally, the report suggests that the credit crunch and economic downturn have worsened the problem by increasing many people's money worries.

Britain has been in recession since the end of last year and unemployment has risen to a 14-year high. According to financial charity Credit Action, the collective national debt stands at just under £1.5tn.

Each household that owes some form of unsecured debt, such as through a credit card or personal loan, is typically over £20,000 in the red.

Writer and broadcaster Stephen Fry, who also campaigns on mental health issues, has welcomed the publication of the study. He said: "My own bipolar condition has caused me to go on many giddy spending sprees so I have first-hand experience of the difficulties of debt brought on by poor mental health.

"An understanding of the relationship between mental health and unmanageable debt should ensure that appropriate advice and support is provided to those who need it."

Credit card theft may rise in recession

By UK CreditCards.com

Evidence from prior recessions shows that credit card fraud rates rise when the economy does badly, credit bureau Equifax warned.

According to the credit reports provider, card customers should take steps to improve their personal security in order to limit their chances of falling victim to the crimes.

Figures from CIFAS, the UK's fraud prevention service, have shown that impersonation fraud rates rose by 43% over the first six months of the year, when compared with the same period in 2008.

This total included cases where bank statements, passports and credit cards are stolen through muggings or burglaries and then used by the criminal to take out other financial products in their victims' names.

Neil Munroe, external affairs director for Equifax, commented: "In some respects, historical evidence has proven that when times get tough identity theft and fraud does increase.

"People do need to be aware of that and do need to take major precautions these days to make sure they don't become a victim."

Common ways for people to protect themselves against identity theft include keeping passports locked away at home and always shredding old bank statements.

CIFAS has also tracked a 16% annual rise in general UK fraud for 2008.

Credit card spending warning issued to students

By UK CreditCards.com

Britain's students are risking high debts through irresponsible spending, a report from Equifax has suggested.

According to the credit specialists, 30% of students do not know their overall level of credit card spending.

Meanwhile, 19% only make minimum payments on their credit card balances and 39% have not saved any money to help them fund their studies.

Neil Munroe, external affairs director for Equifax, commented: "Our survey of students suggests that many heading back to university could find themselves struggling if they don't keep a keen eye on their finances."

A report released by Halifax earlier in early October suggested that many students were experiencing increasing financial hardship in the recession.

According to the study, around 59% will use some form of state assistance this year. A year ago, this total stood at 49%.

UK credit card fraud losses decline

By Cara Henis

The amount of money lost due to fraudulent credit and debit card activity fell by 23 percent in the UK during the first half of 2009 compared to the same time last year.

Card fraud cost UK consumers and banks £233 million this year, down from £304 million, according to Financial Fraud Action UK (FFAUK), a payment services company.

The occurrence of card fraud declined in almost all categories, including internet, phone and mail order transactions, which historically contributed to the most annual losses. The cost of these crimes fell by 18 per cent. However, the most dramatic decline -- a 48 per cent drop -- was in counterfeiting scams. Fraud involving ATM machines, face-to-face transactions and misplaced cards also decreased.

Card identity theft and phishing scams -- which typically involve tricking a consumer into entering personal information and passwords into an illegitimate Web site -- were the only two areas involving card fraud that increased. Card ID theft climbed by 23 per cent while phishing scams rose by 55 per cent.

Despite the moderate decrease in the overall amount of fraud committed using UK-issued cards, scams involving foreign-issued cards in the UK are up by 36 per cent. This leads experts to believe card fraudsters are still active, but setting their sights on new targets.

"Although it's difficult to prove, we think that one of the reasons for this dip in card losses may simply be as a result of fraudsters realising that they can prosper more by targeting foreign-issued cards -- particularly those without chip and PIN protection," said Katy Worobec, head of fraud control at FFAUK, in a press release.

Chip and PIN protection requires a consumer to enter a personal identification number at the end of each transaction. The PIN acts as a password, which means thieves must have access to the number before they can do much damage. The UK initiated efforts to password-protect the country's cards during 2006.

"Chip and PIN has undoubtedly continued to make it more difficult for fraudsters to commit fraud on our cards in the UK," according to the press release.

Card providers make significant policy changes

By UK CreditCards.com

On October 5, Sainsbury's Finance announced it will be offering customers "respite" by making significant changes to its credit card deals.

The provider will now be extending its 0% period on purchases for new customers to 10 months, from the current level of three months.

APRs for the average customer are to be reduced from 16.9% to 15.9%.

Stuart McKeggie, head of Sainsbury's Credit Cards, pointed out that both of these moves went against current trends within the sector as a whole.

"We are … hopefully offering borrowers a bit of respite in what is still a tough economic climate for many people," he added.

Meanwhile, Royal Bank of Scotland has announced that it will no longer be offering credit card deals to customers if they do not already have an account with the bank.

Credit card providers in general have increasingly focussed on customers' risk profiles due to the financial crisis and economic downturn.

The Bank of England said recently that credit conditions in the UK were likely to remain tight throughout the rest of the year.

UK banks, cards, subject to increased complaints

By UK CreditCards.com

A report from the Financial Ombudsman Service (FOS) has named the credit card providers and banks that are the subject of customer complaints.

The organisation said that it received around 70,000 new complaints over the first six months of 2009.

Five large high street banks, the Lloyds Banking Group, Barclays, Royal Bank of Scotland, Abbey and HSBC, accounted for over 50% of the total.

Meanwhile, FOS said that it had found in the customer's favour in around six in ten of all cases. This total went up to around 90% for credit card firms Capital One and Egg.

Christopher Kelly, the organisation's chairman, commented: "I will now be writing to the chairmen of the financial businesses that generate the largest proportion of our complaints workload, to ask them to consider very carefully both their own complaints performance."

FOS now plans to publish complaints data at six-month intervals. The new report is the first time that individual firms have been named as the source of complaints.

Foreign cash left unspent by travellers

By UK CreditCards.com

The widespread squandering of foreign currency left over from holidays by travellers was exposed Oct. 2 by Santander Cards.

Around £1.78bn has been left unspent this year, with 3% of holidaymakers either doing "nothing" with the cash or throwing it away.

Meanwhile, 62% were found to be saving the leftover money in order to spend it on future holidays and 8% were simply giving the cash to others.

The problem was also revealed to be very widespread, with 71% of people who had holidayed abroad in the past year returning home with unused money.

Callum Gibson, director at Santander Cards, said: "While it's not surprising that Britons are returning from foreign holidays with some leftover spending money, the incredible amount of unused foreign currency floating around the nation's homes is quite unexpected."

In response to this apparent wastage of funds, Santander Cards advised travellers to use credit cards for larger holiday purchases and to "carry only small amounts of cash" while overseas.

However, the cost-effectiveness of this approach is determined by the foreign currency fees levied by individual providers.

Many firms charge extra for overseas foreign transactions and cash withdrawals.

Reports highlight tight card markets

By UK CreditCards.com

Britain could face a contraction in credit provision due to financial losses at banks caused by rising customer defaults on credit cards and loans.

The International Monetary Fund (IMF) suggested that financial firms around the world were facing balance sheet difficulties which would translate into tougher criteria for corporate and consumer borrowers. In all, demand for credit in the UK was expected to outpace supply at a rate equivalent to 15% of GDP next year.

This is a far higher ratio than those forecast for other major nations. Elsewhere in the report, the IMF said that Britons "traditionally rely more heavily on credit cards for borrowing" and that the UK "appears most susceptible to credit constraints."

It added: "In Europe, with credit card delinquencies rising -- especially in the UK, Ireland and Greece -- consumer credit markets have come under pressure."

The Bank of England also released figures today which highlighted the continuing tightness in credit criteria. According to a survey of lenders conducted by the institution, the availability of unsecured credit to households has diminished over the last three months and is likely to fall further over the next three.

Meanwhile, 11% more lenders reported a fall, rather than a rise, in credit card demand from applicants over July to September 2009.

Charity credit cards can make a difference

By UK CreditCards.com

Use of charity credit cards helps customers "maximise donations" as the recession leads to tough times at not-for-profit organisations, new analysis indicates.

Many charities are facing a financial squeeze in the downturn as consumers are less willing to make donations than before, the Independent on Sunday reported.

Recent figures from the Charities Aid Foundation (CAF) show that the average amount donated by members of the public has fallen by 11% over the past year.

The industry body also suggests that the charities are facing a financial "pincer", with the credit crunch leading to demand for services increasing even as donations drop.

Speaking to the newspaper, CAF spokesman James Ketchall explained: "Those charities involved at the sharp end of the recession -- employment, mental health and debt advice -- are the most hard pressed at this time."

However, the report added that "a few simple steps" by UK consumers could "spell the difference between life and death for some charities".

One of the examples given was the use of charity credit cards, which donate to a chosen causes via customer purchases. For example, MBNA's WWF Credit Card makes a pre-set donation to an environmental charity whenever it is used.

Cards linked to the NSPCC and Cancer research are also available on the UK high street.