Where Does It Go? – UK Money Blog £

Introduction

Initially, the credit crunch and, subsequently, recession has had a significant effect on the spending habits of myself and other British consumers. Falling house prices, rising unemployment and reduced lending from financial institutions has, inevitably, caused many consumers to rein in spending and to improve their personal balance sheets, particularly with regard to debt management. Indeed, the majority of consumers are looking to reduce their debts, on credit cards, loans, etc., rather than taking out more credit.

Eliminating Credit Card Debt

A consolidation loan, where multiple debts on credit cards, personal loans, etc. are replaced by a single, affordable loan with a longer repayment period, is not a method of eliminating debt, per se. Yes, it is a method of restructuring debt, which can reduce your cost of living in the short-term, but you may end up paying back more money in the long-term. Eliminating credit card debt, completely, essentially boils down to spending less than you earn, and setting aside enough money to pay off more than the minimum repayment on your card(s) each month.

The first step in doing so should be to stop spending on your card(s) altogether, to prevent the situation becoming worse, rather than better. Some tactics to avoid spending is to put the card into a cube of ice, to help combat impulse buying (without a hairdryer!)

The second should be to prepare a monthly budget, so that you can see exactly how much disposable income you have left after essential outgoings, such as mortgage, rent, utility bills, food, etc. are taken into account. Once you know how much you have left, it is worth setting aside a little for “luxury” items, if you can afford to, and the remainder can be used to service your credit card debt. Whatever your level of credit card debt, you can reduce the amount of interest that you pay by switching your balances(s) to 0% interest deals on a regular basis, if your credit rating is sufficiently high.

Thankfully, three times more people have access to the Internet, nowadays, than during the recession of the early Nineties, and many consumers are using comparison sites to shop around for cheaper deals on car insurance, gas, electricity, etc., as well as shopping and selling their unwanted belongings online. Other cost cutting measures include walking, or cycling, instead of using a car, or public transport, and a reduction in takeaways and eating out. Mobile phone operators have also worked hard to simplify mobile phones and tariff options in recent times, making it easier for consumers to find value for money.

A few facts have been sent to Where Does It Go over from Compare And Save (www.compareandsave.com), a UK leading credit card comparison site:

• The concept of a credit card for consumers came about when an American enjoying a meal out for dinner in 1949 realised he had left his cash at home and decided that an alternative to cash would be a good idea. Frank McNamara came up with the Diners Club Card and by 1951 there were 20,000 Diners Club cardholders.
• The first credit card was made of cardboard and it was only in 1951 that it was changed to plastic so that it lasted longer.
• Credit cards are normally the same shape and size because the follow the ISO 7810 – an international standard that outlines formats for certain types of cards.
• The most common size for a credit card in 85.60 x 53.98mm.
• Whenever you get a new credit card (or debit card for that matter), you must ‘activate it’ before using it by ringing up an activation number or by going online.
• There are more credit cards in the UK than people – at the end of 2007 there were around 60 million people who between them carried 73.2 million credit and charge cards
• 70% of consumers with cards did not take the time to compare credit cards before applying.
• You have to be at least 18 years of age to get a credit card. In fact to get some credit cards you need to be as old as 25 and on a certain annual wage in order to be accepted.
• Credit cards must be signed by the authorised cardholder in order to be valid.
• Credit cards may be your ‘flexible friend’ but if you bend them too much, they will snap!

After consulting the snowball calculator, the figures indicated it’ll take me around 2 years to pay off the debt s I have on my credit card at the moment.  After digging around a little in www.MoneySavingExpert.com, I gave Martin a bit of cash by clicking his affiliate link to the HSBC CreditCard

My reasons where:

• I could pay off the debt in under two years.
• I didn’t want to have to switch too soon in 12 months say
• Give myself a little discipline by not having 0 interest, so encouraging me to pay it off and not spend more on the card
• My current 0% plan is ending in 2 months
• No annual fee
  

I’ll follow the Golden Rule – no purchases on this card until the balance transfer is paid off – it’ll go in the drawer and a direct debit set up to pay it off, to avoid interest being paid on that before my balance.

I think this keeps up with my philosophy of money saving without working too much – I don’t want to count the pennies but will count the 20p’s?

The stats of the card according to the website are:

• 0% on purchases for 12 months from account opening
• 2.9% for two years on balances transferred within 30 days of you opening your account. 2.5% balance transfer fee applies (minimum £5)
• Typical 15.9% APR variable after introductory period
• No annual fee to pay

A good overview on how to deal with credit cards is found here at No Credit Needed – Credit Companies Want Your Money