The new credit card stoozing? High Interest Accounts

With the low interest rates at the moment, its been really hard finding a good enough account to save, with Barclays offering a paltry 0.5% on my savings I was looking for a better deal.

It was whilst I was walking down the high street I noticed several banks offering “6% savings” which all happened to be part of the Santander group – enquiring within one, Alliance & Leciester, it seems for the moment all the banks are still operating under separate licences but offering similar deals. The 6% account comes with a catch – you need to invest £500 a month (£1000 a month with Abbey) and the limit is £2500. However, there is nothing stopping you opening up several accounts to take advantage of the deals at each and transferring the required minimum each month via an elaborate system of standing orders. The practice reminds me a lot of Stoozing where similar balances transfers are carried out by credit card 0% chasers.

If you have used up your cash ISA for this year, you may consider it (since ISA’s are offering only about 2.85% net at the moment) – you could probably invest around £7500 over three accounts, for a yearly return of around £450.

Whatever happens, I am avoiding long term bonds since I’m guessing interests rates will go up in the next few years – they simply can’t get any lower and that debt is ever increasing.

How to Eliminate Credit Card Debt

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.

Simple Stock Investing www.simplestockinvesting.com Review

Andy from Simple Stock Investing got in touch about his website giving investment tips to non-professionals, or as he puts it “who are educated but not in finance” – the site aims to give information on those savers who may be interested in playing the markets without subscribing to the “Boiler Room” stereotype!

The site has functional design which perhaps has too many Google Adsense ads, and the navigation is sometimes confusing to find what you are looking for, but on a pure content point of view the site is a Win, with lots of informative content that brings an original point of view to investing, written in a chatty but informative style.

A good example is the post Why Investing Isn’t Gambling, although it can be which I highly recommend.

I’ll let Andy explain his ethos in his own words:

Although many of these tutorials address funds more than stocks, and
they suggest allocating assets in other instruments as well as equity,
I chose the word “stock” for the title because I have the idea that
the inner question of such potential visitors is something like “What
if I invest this money in the stock market?” During the first months
I used “ETF Investing” as a name, but then I thought it might be too
technical, and exclude articles on mutual funds, closed-end funds and
stock, unnecessarily.

Another aim is to process and present data that may lead to useful
conclusions for this style of investing. I mean, to answer questions
such as if buying N different stock can achieve a good level of
diversification, what the ideal period may be between re-balancing,
etc. So far, the only article of this type I have published is one
with the historical performance of the S&P 500 index. It is the most
popular in the site, so I’m planning to put some emphasis on this kind
of article.

Andy invites ideas for new articles so head on over to have a look.

Would you like your financial site reviewed? Get in touch via the contact details above.

Online Money Management Service for the UK

Kublax,a new money management service got in touch with details of their new money management service – could this be the Mint for the UK?

Details from their Press Release below:

A new online financial service has been launched in the UK, set to pioneer the way forward in personal finances by simplifying the way people manage their money. Called Kublax, the service works by aggregating all financial information in one place, such as bank, building society, and credit card accounts, and presents them in an easy to understand way.

Kublax aims to make money management an easier procedure, while helping users to save money and create better budgets in the process. The service offers a great alternative for anyone who finds budgeting and balancing their finances difficult, or those who are looking for a free online alternative to expensive desktop financial software.

In addition to pulling together all financial details to a central source, the new service features many useful interactive features, including alerts and budgets. Once a user has uploaded the details of their financial institution, the advanced software automatically categorises the users’ expenses in order to see exactly where money is spent each month.

By setting up a budget on the service, users can track their fixed budget against their actual spending. The handy alerts system also means users can be quickly notified of any usual account activity as well as always be reminded when bills are due to avoid paying late fees.

The new service also features a unique ‘compare me’ function. This tool allows users to anonymously compare their spending with others throughout the UK, and could help users identify clear budget categories they could cut down.

Displaying data visually in easy to read graphs and charts, the product aims to make budgeting a faster and easier process for the UK consumer.

Kublax’s initiative to help consumers have better control over their finances may also help them to save. Throughout the site, users will find suggestions on where they could save via switching account providers.

Users can also feel safe using the service, as it is completely secure. The site uses bank level security and is verified to be hacker proof by McAfee. The site has been qualified by the VeriSign security seal, while their privacy policy has been approved by TRUSTe. Because the site offers a read only service, no transactions can take place via the online software.

Although only launching the product a few short weeks ago, the original concept had already won the Seedcamp 2007 startup competition, and has been well received by the media.

The free financial management service should come as a relief to the millions of Brits who have found balancing their finances and building budgets to be a time consuming and difficult process. For more information or to use the product, visit www.kublax.com

Sounds interesting, I’ll be having a look around the site and reporting back if its any good.

Using Wolfram Alpha for your finance needs

In case you haven’t heard of it, Wolfram Alpha is a new calculation engine that puts the power of a supercomputer in every bedroom – a step towards the semantic web that is the future of the web.

However, before such lofty aims, WA can be used to help with your financial decisions – like so:

• Need a rough figure on how much a mortgage will cost you over 25 years at 5% fixed rate interest?
• How much will you need to invest now at 6% to get £20,000 in 5 years time?
• How much pension will you get if you earn £20,000 now, expect pay rises of 4% a year, am 32 and expect to retire at 70?
• How long will it take to pay off £3000 on your credit card at 25%
• The GDP of the UK?

..and so on.

The tool has its limitations (for instance couldn’t understand £ to $) but its very powerful when applied to what it knows, mainly mathematics related.

Monthly Spend Calculator

I know its in dollars, but this calculator seemed appropriate to you, my noble readers in the UK:

10 facts about credit cards

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!

Avoiding UK Tax? You could be named and shamed – Budget 2009

One aspect of the 2009 budget was a initiative to make people pay their taxes more by threatening to “name and shame” them on the HMSC website.

The budget report states:

Legislation will be introduced, to be bought into effect by Treasury Order, enabling HM Revenue & Customs to publish the names and details of individuals and companies who are penalised for deliberate defaults on or after 1 April 2010 leading to a loss of tax of more than £25,000.

What could be better disincentive for an upright British gentleman businessman, dependent on his reputation, than to avoid having his name splashed across a virtual “naughty step”?

This could be a nod to the public outrage over pensions and such like, angry at the notion of rich bankers suspected of playing the system and so avoiding paying their fair share of tax. This is in addition to a pretty much purely symbolic of adding a 50% tax bracket on the £150,000 bracket – a move that will only bring in £1billion worth of income, small fry compared with the huge sums of ever increasing debt the UK faces for the next 10 years.

The “name and shame” scheme has already been tried in Ireland to good effect, improving tax revenues.

Why not just tie them to the village green stocks and supply free rotten tomatoes to the public – such a move I’m sure would add 10 points to their opinion polls overnight!

Read it for yourself at the hm-treasury website – this is where YOUR money is being spent, you have a right to know where!

Financial Statement and Budget Report

* Chapter A (PDF 307KB)
* Chapter B (PDF 488KB)
* Chapter C (PDF 436KB)
* Lists of abbreviations, charts and tables (PDF 49KB)

What To Do with £10,000 – ISA, Property or Shares?

At the moment how to spend £10,000 from say inheritance or another windfall is a surprisingly hard question. The classic answers such as ISAs, property or shares have all taken a pounding in these last few months.

ISAs

These are tax free accounts which typically have high rates of interest to encourage you to put the money away for 12 months. At the moment these are looking around the 3.5% mark, if you leave it in for a year. If you draw out the money in the 12 months, a lot of accounts will only pay you around 1% on your money.

This is not just a low rate, you could actually lose money in real terms – with inflation running at 3.2% any money put aside not earning any interest will devalue that amount.

Inflation figures April 2009

Taking inflation into account your 3.5% ISA could in fact only be getting 0.3% a year in real terms! On £10,000, you would earn a paltry £30.

This would be better than leaving it under the mattress though, but only just! Its all to do with the government trying to encourage you to spend your money on goods to help kick start the economy.

Property

For so long the easy option if you had the money, property prices have plummeted over the last 12 months, with some predictions saying houses will lose 50% from their peak. Even if the house price crash had never happened £10,000 wasn’t enough for a sensible deposit if you wanted to stay away from the 100% mortgages (which with the hindsight of history would have been a GOOD thing).

Suffice to say, if you can buy at the moment you may pick up some bargains compared to recent years, but don’t expect your property to be sold for profit for a good few years, maybe even 10 years. This will probably mean you buy to live in the house, which is really what buying a house should primarily be for; the culture of get-rick-quick by investing in property must be held accountable for half the trouble of what we’re in at the moment.

Shares

If property prices are bad, then shares are an even more tragic affair. The FTSE which tracks the 100 best performing companies in the UK has crashed from peaks of 6500 to around 4000 today, and no one knows if that is the end of it. Saying that there are some shares thatt have bucked the trend, so if you’re a financial wizard or someone who knows something every other share trader doesn’t, you may still have a chance to make some money, especially if you manage to buy a stock at a current low and it soars upwards over the next few years – but with the current climate that £10,000 invested could equally end up as £0 once the company goes bust.

A good overview of shares verses house prices over the last 20 years is found at Fool’s new site, LoveMoney, which states:

If I were to summarise these results, I would say that both asset classes have produced useful returns for investors since 1984, with shares winning by a nose. However, the FTSE 100 is considerably more volatile than house prices, so investors in shares need to be patient in order to ride out the fairly frequent setbacks which the stock market springs on us.

So, all being told, where would my £10,000 go?

• I’d concentrate on clearing all debt, thats a no-brainer these days. Why pay 7+% on a loan if any saved money is only getting 0.3%?
• Buy anything you’ve been thinking of getting for a while, taking advantage of the temporary 15% VAT (and also do your bit to save the country from financial Armageddon)
• Look to invest in people or business – if you’ve got a good idea, now may be the perfect time to lend money to an idea you think will succeed, since banks are being so tight with their money.
• Buy things that will increase in value over time – antiques? Limited edition items? Art?
• Go on that holiday trip of a lifetime. May as well enjoy the world in a cheaper country whilst you have the chance.
• If you have a mortgage, try and overpay as much as possible for when those interest rates will rocket up in the future

Those are my suggestions, if you have any other bright ideas, feel free to say underneath – I think we could all do with some!

Credit Crunch Explanation Videos

Some good videos looking at the current crisis.

A good overview for amateur:

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

A more in depth look (1 hour):

Will Hutton Capitalism Crisis is a good overview of what went wrong from the viewpoint of a Keynesian.