Family Finance Weblog

Last summer the Office of Fair Trading warned the credit card industry that its penalty charges were excessive and had to be reduced. The industry largely ignored the warning so now the OFT is to force massive reductions - by up to 40%.

Later this month, the OFT is expected to announce maximum levels for the charges the providers impose on those clients who breach their credit limits, who pay late or whose cheques bounce. Rumours indicate that the cap will be around £15, perhaps lower, in comparison with the £20-£25 level so common within the industry.

This action follows an inquiry initiated by the OFT last summer. Eight of the largest credit card companies were asked to respond to the OFT’s provisional view that charges were at unfair levels and invited the companies to respond with data that would justify the fees they charged. Clearly, their responses failed to impress! It is known that HSBC, Lloyds TSB, Barclaycard, The Royal Bank of Scotland and Egg all argued that their penalties were justified by the costs incurred but their information couldn’t have been sufficiently compelling!

The consumer body “Which” is firmly on the side of the OFT. Their spokesman said, “We believe that bank and building society charges should be fair, reasonable and transparent, yet every year they make £3billion from these charges, which we consider to be disproportionate to the true cost”.

We agree. Just think – by dragging their feet for six months on this issue, the industry could easily have made £600 million more profit than the OFT thinks is truly justified. We say to the OFT, get tough and demand immediate action. Don’t give the banks etc months to put their act in order – that just lets them line their pockets for a little longer but even in a short time the excess profits they generate can be enormous.

Get your skates on OFT!

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These days, if you apply for any form of loan or credit, the finance industry will inevitably scrutinise your credit history. You’ll hardly have to tell them anything as within a fraction of a second, their computers will lock into your credit file held by one of the big three credit agencies; Equifax, Experian and Callcredit. And you’d be amazed what they know about your finances!

As far as the finance industry is concerned, the more information they can get about you, the better. Their computers then analyse all this information and statistically assess your application.

For years now banks, building societies and other financial institutions have been sending information about your finances to the credit agencies. They know all about all the credit applications you’ve made, the times you’ve missed or been late paying a loan, mortgage or credit card, the balances on your loans and credit cards, whether you pay off the minimum each month and even your credit limits. They’ve also accumulated lots of other information about you culled from the voters’ roll and the public register of court actions where county court judgements are recorded.

Yet despite this mass of information, there is one notable omission. Despite representations to the government, information on any student loans that you may have is not available to the credit agencies. This is because student loans were set up as a debt to the taxpayer, not a commercial business.

Before September 1998, student loans were repaid by mortgage style direct debits to collect loan repayments once the graduate started earning over £15,000. But more than 59,000 of these pre 1998 graduates are understood to be in arrears on these repayments to the tune, on average, of about £2,750 per graduate.

After September 1998, the system of collecting student loans changed to a much more efficient method which avoids the possibility of bad debts. Repayments are now deducted direct from salaries by employers along with income tax and national insurance.

The credit industry argues that it needs information on student loans as they can represent a significant strain on the graduates’ finances – especially as the loans are repaid at the rate of 9% of the graduates’ income in excess of £15,000. And with the introduction of top-up fees, the average student loan is now much bigger. Therefore, to fully assess their financial situation they need this information. This view is supported by a spokesperson from the Finance and Leasing Association Consumer Credit Counselling Service who said, “Knowing whether a young person has a student loan and whether it is being paid back is useful.”

Yet despite the clamour to share the information, the Department for Education and Skills remains steadfast in its decision not to allow the Student Loan Company to share its information with the commercial sector.

Even the Citizens Advice Bureau wants this decision changed arguing that the credit industry needs the student loan information to help ensure that graduates are not taking on so much debt that they can’t afford to maintain repayments.

But for now at least, the situation remains. Credit agencies cannot obtain any history about student loans.

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For providers of loans, mortgages and credit cards, getting to the top of the Best Buy” tables is like hitting the jackpot. The customers can’t get through the door fast enough!

Customers can find the Best Buy tables in press and magazine articles or on certain price comparison web sites - they’re like manner from heaven for those of us wanting to emulate scrooge! Indeed, for finance companies, top positions can make all the difference between success or failure for a new product. So it should come as no surprise to learn that enterprising finance executives are not behind the door when it comes to devising tricks to find a way to the top of the tables.

Take Alliance & Leicester’s Moneyback Loan for instance. This loan product recently hit the top of the Best Buy tables for a £5,000, 3 year loan in a subscription only magazine for finance professionals called Moneyfacts. The interest rate was 5.5%. But the marketing boys at Alliance & Leicester had engineered the product to win top place for a £5,000 loan. The product was structured so that unless a client wanted exactly £5,000, the amount the client ended up paying increased and effectively pushed the product well down in the comparison tables. Not was all it seemed!

In the mortgage market, the Northern Rock Building Society provides another good example. It has a table topping position for it’s two year fixed rate mortgage. But look closer and you’ll find that they’ll only lend on 80% of the property’s value and it has a 1.5% arrangement fee. This means that it only makes sense for those wanting a mortgage of over £175,000 and effectively rules out most first time buyers.

Now take credit cards. Which is the better deal – Cahoots card charging an attractive 11.9% or HSBC’s at 13.9%? The answer is that it depends on how you use your card! Cahoot charge interest right up to the date they receive payment whereas HSBC only charge interest to the date the bill is produced. The result is that if you regularly paid off your bill, HSBC would be cheaper!!

So what is the lesson to be learnt? Lenders are in the market to make profit and you can bet that if on the surface, a loan, mortgage or credit card looks really cheap, there’s going to be a catch somewhere – some angle through which the lender gets more money back.

In our view there’s no such thing as “A Best in Market”. What’s best for you will depend on your personal circumstances and how you want to operate the finance. So by all means look at the “Best Buy” tables but do so with a pinch of scepticism and a healthy regard for the small print! The problem is that most people are not sufficiently experienced to sort out the small print – so our advice is that when considering a significant financial purchase, use a broker. This does not necessarily mean that you’ll have a brokerage fee to pay, many of the brokers work off the commission they receive from the lenders, and their experience could save you a packet.

All the best financial brokers have web sites so our advice is stay online and let your fingers do the searching!

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The Competition Commission has at last moved to shame credit cards in to cutting their charges. The move comes after the Commission concluded that the industry was overcharging customers up to £100 million each year through excessive interest rates and other charges.

The main culprits were found to be store cards which were charging up to 30.9% interest even though the Bank of England’s base rate stands at just 4.5%. The worst culprits were TJ Hughes and the Faith Card who you can see heading the Table of Shame shown later in this article.

In addition, the commission came down on high penalty charges for missed or late payments and Payment Protection Insurance. Penalty charges currently average £15 per event – but the Commission argue that these charges are also excessive.

As for Payment Protection Insurance, the Commission has decreed that whilst this insurance can be a good idea, credit card operators have abused it. Therefore, Payment Protection Insurance must no longer be sold as a package with a credit card; it must always be purchased as a separate transaction. That’ll be good news for the Internet where all the cheapest Payment Protection Insurance deals can be found with premium savings up to 60% in comparison with credit card and loan packed arrangements.

The new rules from the Competition Commission mean:

· If a credit card charges more than 25% interest, it must carry a warning that there are cheaper ways to borrow. These warnings must be displayed on each monthly statement.

· The interest rate and penalty charges must me clearly displayed on the front of every monthly statement.

· The monthly statement must also warn of the consequences in terms of higher interest charges, of only paying the monthly minimum repayment.

· Cards must offer the option for customers to clear their monthly balance each month by an automatic direct debit. This avoids any possibility of interest charges and late payment penalties.

· Credit Card operators can no longer sell Payment Protection Insurance packaged with the credit card. They must be both separate and optional transactions that enable purchasers to see the true cost.

These new rules seem certain to shame retailers into cutting their charges – that’s not to say that 25% pa interest is a snip! Main line credit cards are currently charging circa 14% to 18% and we think that’s too high! Indeed, between 80% and 90% of store cards are charging more than 25% and are held by some 11.5 million customers. But some retailers have already realised that their sky high charges couldn’t be sustained and have taken steps to trim back. Harvey Nichols has already trimmed their interest from 28.5% to 21.9%, River Island has gone down from 29.9% to17.9% and Monsoon from 29.9% to 18.9%.

But who are the bad boys? Here’s our Table of Shame:

TJ Hughes 30.9%
Faith Card 30.9%
Owen & Owen 30.7%
Burtons 29.9%
Dorothy Perkins 29.9%
East 29.9%
Evans 29.9%
HMV 29.9%
JD Sports 29.9%
Kwik Fit 29.9%
La Senza 29.9%
Laura Ashley 29.9%
Miss Selfridge 29.9%
Russell & Bromley 29.9%
Ted baker 29.9%
Topshop/Topmam 29.9%
Wallis 29.9%
Warehouse 29.9%
House of Frazer 29.3%
Bhs Gold Card 29.0%
Habitat 29.0%
Oasis 29.0%
Harrods 28.9%
Fenwicks 27.9%
Selfridges 27.6%
Bentalls 27.2%
Jaeger 27.1%
B&Q 26.8%
French Connection 26.8%
Argos 25.9%
Homebase 25.9%
New Look 25.9%
Note: Some of these cards offer lower rates for payments by Direct Debits
Source: Competition Commission/Moneyfacts March 2006

Most car buyers will have spent hours researching makes and models of car before deciding what to buy. Then four out of ten sign up for the car within 30 minutes of stepping inside the showroom.

But will their diligent research extend to finding the cheapest source of finance? It seems not. Almost 50% of new cars bought privately are bought on finance and nearly 20% sign up for the finance deal offered by the manufacturer. That could turn out to be a costly decision. With manufacturers finance typically costing 13.7% over a 3 year including a 10% deposit, they could be throwing about £1,800 down the drain.

Someone buying a Renault Megane Sport Saloon Privilege costing £16,000, would end up paying £17,384 over the full 3 years. However, if you have a good credit history, you could get a personal unsecured loan at only 5.5% and end up paying just £15,631 – that’ll give you a saving of £1,753. This illustrates that accepting the showroom’s finance instead of shopping around for a low rate loan, can hit your pocket hard – its like giving back the discount we hope you negotiated!

I can hear you telling me about the special finance offers that the manufacturers advertise extensively. Yes there are some good deals but always look closely. Some only relate to specific models and specific specifications, often the cars that the manufacturers are having trouble shifting, and some deals have stings in their tails. Take the current offer on the Volkswagen Polo E2. This deal is advertised at 5.8% with a monthly repayment of £99 over 35 months - but at the end you’ll find you have to make a final balloon payment of £3,750 or trade your E2 in for another Volkswagen.

The manufacturers offer these deals to encourage brand loyalty and a repeat purchase in 3 years time. They know that most people will trade their car in after 3 years rather than find the large balloon payment.

Of course, manufacturer’s finance and cheap personal loans are not the only way you could finance your car.

Hire purchase is the traditional way to pay for your car. Here you pay a deposit usually of at least 10% or trade in your existing car for at least the same value, and then your HP loan for the balance, is secured on your car. Therefore, in practice your car still belongs to the hire purchase company until you have made your final monthly payment.

If you want to sell your car before you’ve completed the HP agreement, there will almost always be an early redemption penalty – often two or three months interest. The HP company will always register its interest in your car with HPI the finance tracking agency. This will effectively mean that you will not be able to sell the car until you have paid off the balance of the HP you owe.

The other alternative is Personal Contract Purchase. These are the deals most dealers will attempt to sell to you. You also agree the annual mileage you expect your car to clock up. Then you pay a deposit and part of the purchase price is deferred until the end of the agreed payback period. Your monthly repayments then pay off the balance and the interest. These schemes are very flexible so you can choose the length of the car loan and the amount of the deposit but interest rates vary considerably between lenders. At the moment the average is about 12.8% - still well above the 5.5% rate for a cheap personal loan.

At the end of a PCP contract you’ll have three options – pay off the deferred sum and keep the car, trade in the car using the trade in value to help pay off the deferred sum and hopefully leaving a balance towards a new car, or hand in the car and walk away with nothing more to pay.

This last option is always subject to the provision that your cars’ condition reflects normal wear and tear and its mileage is in line with the annual mileage you agreed when you purchased it. If the mileage exceeds the agreed mileage, then you’ll have an excess mileage charge to pay based on the number of excess miles. The cost per excess mile will be specified in the PCP agreement.

One of the advantages of PCP is that the guaranteed buy back option, effectively protect customers against excessive depreciation.

As the dealers take a commission for selling the PCP contract you may find that they will give you a bigger discount off the price of your car or even throw in a low cost servicing package or low cost insurance. But you’ll need to do a little homework to ensure that these extra goodies are truly worth the extra interest you’ll have to pay within the PCP contract.

Have you recently received a batch of cheques from your credit card company suggesting that you might like to use them to treat yourself? No? Well that’s surprising as over 10 million are sent out to cardholders every year.

Beware. If you use the cheques the charges can be high. Purchases sometimes attract a higher rate of interest than standard card purchases and there’s no interest-free period. You may also be charged a handling fee of up to 2%. All these charges swell the credit card company’s coffers by around £57 million every year – so they’re particularly keen on them!

But the Office of Fair Trading and the consumer group “Which” are much less impressed. They are urging consumers to tear the cheques up. They also want legislation to ensure that the credit companies properly inform their clients about the true costs of using the cheques.

Even last year, as part of a wide ranging enquiry into the credit card market, the influential Treasury Select Committee concluded that card companies should stop mailing unsolicited cheques. Their concerns were the cost of the cheques and the way these cheques were encouraging additional debt.

“Which” certainly agrees with the Committee. Their spokesman said “We want unsolicited credit card cheques to be banned, especially as we have found that companies use them to encourage indebtedness”.

We agree.

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The National Debtline which was set up by the Government to help people in financial trouble, is being overwhelmed by callers. A major Sunday paper has reported that 8 out of 10 of its test calls went unanswered even after holding on whilst the phone rang out for ten minutes. The Debtline recognises the problem reporting that January was its busiest month since its foundation 19 years ago and admits that it failed to answer two thirds of the calls made to its telephone numbers.

The Credit Counselling Service and the Citizens Advice Bureau have also reported record demand with hundreds more calls per day than this time last year. And in the last quarter of 2005, bankruptcies were up by 46% over the same period last year.

If this evidence is anything to go by, there are a lot of people out there realising that they’ve pushed the boat out too far when it come to taking on loans, credit cards and other forms of debt.

For those that simply can’t solve their financial crisis, there are two options. An Individual Voluntary Arrangement (known as IVA’s) and Bankruptcy.

IVA’s are a more lenient form of insolvency whereby you pay back a percentage of what you owe, typically 30 – 50%, over five years. But don’t think that an IVA is an easy way out – it’s a legal agreement between you and your creditors and is administered by a specialist insolvency company. If you don’t keep to the agreement you can be forced into full bankruptcy at any time. But at least after five years it’s all behind you and whilst your credit rating will b battered it won’t be out for the count.

The more extreme option is bankruptcy. Under the 2002 Enterprise Act, bankrupts debts can be discharged after just one year as opposed to the three years it took previously. For this reason, more and more people are biting on the one-year bullet. Everything you own other than the essentials for living, become the property of your receiver to be sold to pay off as best as they can, your creditors. Special arrangements are put in place for your home if this is jointly owned.

Then at the end of the year you are free to go your way to rebuild your financial life. Credit will be impossible to obtain for 12-18 months but after that doors start to open and life gradually get back to normal – just learn from the experience and make sure you don’t repeat you mistakes.

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The Office of Fair Trading is at last preparing to take the big banks and other financial institutions that issue credit cards to task over charges. On credit cards, the average fee for exceeding the credit limit has climbed 40% to over £22. The charge for missing or late payments has also soared to over £22.

The OFT believes that these charges represent an illegal and unfair penalty as the banks true costs of dealing with these situations are much lower. So it seems that the OFT is likely to try and cap such charges at a figure closer to £15. The banks certainly won’t be too keen on this, as such a decision would cost them in the region of £400 million per annum. We understand that the OFT could make an announcement in just a few weeks time.

In a parallel action The Bank Action Group is taking legal action on charges levied on current accounts and overdrafts. During the last 2 years bank charges on these accounts have run up by as much as 31%, taking the average to around £30. The Bank Action Groups case is being led by Stephen Hone who is using the same reasoning as the OFT, as he asks the High Court to agree that charges are too high and as such represent an illegal penalty.

These actions are made at a time when the UK’s Banks are booming. The top five clearing banks, HSBC, Barclays, RBS-Nat West, Lloyds-TSB, and Halifax-Bank of Scotland, have recently announced profits up 17% at a staggering £35,000,000,000 – yes, £35 billion!

We think the Banks can afford to trim their charges – don’t you?

Women whose family line has a history of ovarian or breast cancer could face higher insurance premiums or be refused cover altogether under proposals from the Association of British Insurers (ABI).

The insurance industry wants the right to ask these women when they apply for life and critical illness policies whether they have been tested for the gene mutations that increase the likelihood of them developing the cancers. But before the insurers can include these questions on their application forms, they must receive approval from the Genetics and Insurance Committee, the organisation that advises the Government on this sort of issue.

The ABI will soon be requesting this Committee for permission to include the controversial questions which ask women whether they have been tested positive for BRCA1 or BRCA2 gene mutations. It’s these genes that are present in 1 in 10 new cases of ovarian cancer and 1 in 20 new cases of breast cancer diagnosed. Women who have damaged BRCA genes have a 14 – 18% chance of developing breast cancer sometime in their lives and approximately 1 in 850 women in Britain inherit a faulty BRCA1 gene.

A note posted on the web site for the Genetics and Insurance Committee said, ” The Committee expects that the Association of British Insurers will submit in late 2006/2007 four revised and updated applications for the use of adverse results from the predictive genetic tests of the BRCA1 and BRCA2 genes (breast/ovarian cancer) in helping to determine insurance premiums for life and critical illness insurance”.

To date, in the UK insurance application forms are only allowed to ask for the results of predictive tests for Huntington’s disease and then only when the application is for cover exceeding £500,000 for life insurance or over £300,000 for critical illness insurance or over £30,000 for payment protection insurance. This policy is set by an agreement entered into by the ABI which is due to expire in 2011 but Harpal Karlcut, Chairman of the ABI’s Genetics Working Party, is reported in the insurance magazine “Cover”, as saying that the Association would like changes.

“We are looking to get approval for the breast cancer test by the end of the year. The two breast cancers are the next conditions that we will look at but after that we don’t see the need to look at other conditions”. He then went on to add a rider saying, “We do keep an eye out for what diseases may come up in the future but there is nothing else on the horizon”. We add another rider – yet!

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According to the consumer watchdog, Which, about 5 million of the 28 million of us who have been targeted by fraudsters, have lost money as a result. Someone is clearly finding fraud highly profitable.

So what are the most common scams and how do you avoid them? Here are five to be thinking about.

The “Money locked up in an account” scam.

This is a really common fraud. It normally starts with an e mail giving a long and involved sob story about someone or some business, which has a very large amount of money tied up in an account and, through the most unfortunate of circumstances, they cannot get the money out. To do so, they need a UK bank account to have the money paid into. Of course, if you help them they will give you a big slice of the money. And the money is always held in a some obscure country, often in Africa.

Once you have replied and taken the bait, they come up with a story that for the money to be transferred to your account, they need you to send a payment, often thousands, to cover the administration or legal costs of enabling the money transfer. The actual details always change but the essence of the story remains remarkably consistent.

Will the payment arrive and will you ever get your money back? Of course not! In fact after you’ve made a first payment, they’ll ask for more! The up front payment needs to be increased and unless the extra is sent, the money you’ve already sent will be lost. You think you’re now in a catch 22 situation. But if you send more money, we can guarantee you’ll never see it again.

Millions of these emails go out each month, so if you get one delete it.

Boiler Room scams
This is a hard-selling technique to persuade you to buy investments on the promise of great returns that turn out to be worthless. Others sell shares in companies that don’t even exist. There are also related scams which involve investment currency or futures or options.

More often than not the initial contact is by telephone and a typical target will be a middle aged professional man ho has some investment experience. They often trace their targets by examining the share registers of UK quoted companies.

If you receive a cold call from a company trying to sell you investments, ask for their registration number with the Financial Services Authority. If they won’t supply the number, put the phone down. If they give you a number call the FSA’s helpline and check out that the firm is indeed registered (0845 606 1234). Never commit yourself until you are absolutely sure that the company selling the investments is reputable. 9 times out of 10 it will not be – so you have been warned!

Credit Card Fraud
The requirement to use PIN numbers will greatly reduce card fraud. But purchases through the Internet use the “card holder not present”, not PIN numbers.

That means that if a fraudster gets your card details he can happily buy on the Internet and fade into the mist with the goods he has purchased and sell them for cash.

To reduce your chances of being caught by this sort of fraud, you should sign up with Verified by Visa or Mastercard Secure Code. You’ll find further advice on www.getsafeonline.org and www.cardwatch.org.uk.

Phishing
Fraudsters are also very active on the Internet trying to persuade you to divulge details of your bank accounts, PIN numbers and security codes.

The fraud starts with a bogus e mail supposedly from your Bank. The e-mail normally asks to you confirm your account details for security purposes. Sometimes it says that unless you complete the confirmation, your account will be frozen. But security is the least of their aims – once they have your details, they’ll simple empty your account!

Be aware that Banks will never ask you to send details of your accounts etc to them by e-mail. If for any obscure reason they did need some confidential information, they would ask you to visit a Branch.

Identity Theft
It has been estimated that an identity theft takes place in the UK every four minutes.

If fraudsters can pretend to be you, they can apply for credit and open bank accounts in your name. This inevitably leaves a trail of debt and criminal activity all conducted in your name.

All they need is a credit card statement and a utility bill in your name. Watch out for the bin men! Better still, buy a shredding machine and shred any personal letters, bills and documents you want to dispose of.

In terms of your family budget, your mortgage is probably the area in which you could find the greatest savings.

If you haven’t re-mortgaged for some time and you’re paying your lenders standard variable rate, then you’re almost certainly paying over the odds. Of course you’ll need to weigh up the costs involved such the administration charge, legal fees and survey fees but a good mortgage broker may well find you a deal where most of those are included in the package or at a special offer rate.

Re-mortgaging could also help elsewhere. It may also be worth looking at any other outstanding debts you have – for example, your credit cards and any other secured or unsecured loans. These could probably be added to your mortgage and make your monthly outgoings more manageable. But if you do this, it would be prudent to overpay your mortgage as soon as possible to pay off the extra debt you added to your mortgage facility.

Some good mortgage deals to wet your appetite are:

Fixed Mortgage - Alliance & Leicester 4.49% fixed till March 2008

Discounted Mortgage – Dunfermline Building Society 4.2% for 2 years (No tie in conditions.)

Discounted Mortgage – West Bromwich Building Society 1.79% till March 2008. Tie in conditions apply.

Offset Mortgage – Hinckley & Rugby Building Society 4.85%

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If you’re one of the one in twenty motorists who regularly drive without insurance you’d better watch out. Your car could be heading for the crusher!

New rules now enable the police to seize, impound and crush any car found being driven without insurance. Since a pilot scheme was introduced in spring last year, the police have impounded more than 1,200 cars and over 650 have been crushed into cubes. Operation Takeaway, as the pilot was called, has been so successful that police forces throughout the UK are rolling out the scheme supported by a revised database that enables them to check the insurance status of every car in the UK.

Now if you’re caught driving without insurance you must hand the car keys to the police at the roadside. This applies to everyone – it doesn’t matter whether the lack of insurance is just an inadvertent mistake or a conscious evasion.

You then have 14 days to show the police a valid insurance policy and recover your car. And other costs will mount up. You’ll have to pay the cost of the police recovering your car (circa £105) plus the secure storage that could easily cost £15 per day. So, if you recovered your car at the last minute, you could be in for a bill from the police for £315.

And if you don’t reclaim the car, it can be crushed into a metal cube and shipped off to a scrap smelter in the Far East.

During Operation Takeaway, the crushing of the cars was part funded by Direct Line. They have estimated that the scheme has prevented as many as 2,000 accidents.

And the Durham police who operated the test, found that many of the cars they impounded were not roadworthy. A spokesman for the police said, “ Uninsured drivers are often guilty of many other offences, such as having neither MOT certificate or driving licence. We are doing everything in our power to get these illegal, dangerous drivers off our roads”.

The problem of uninsured drivers is much bigger than many of us think. According to the Department of Transport 1 in 20 motorists regularly drive without insurance. Research from the Association of British Insurers also shows that it’s these drivers who are amongst the most dangerous on the roads. They are three times more likely to be convicted of driving without due care and attention and, on average, cause one accident every six months.

And who pays for the uninsured accidents? Law abiding motorists. The average car insurance premium includes an additional £30 to cover the cost of damage caused by the uninsured. That adds up to £500 million per year paid out by the UK’s law-abiding motorists!

But that’s not the end of it. If uninsured car is in collision with you, it’s still recorded on your policy as “fault claim”. This means you’ll have to pay the excess on your policy and, unless you’ve got Claims Protection on your policy, your no-claims bonus will be hit. Over a two-year period the loss of bonus could easily cost you £275 in extra premiums.

The move to crush cars has been warmly welcomed by the Association of British Insurers. They have long criticised the leniency of punishment handed out to uninsured drivers but they still want the courts to get tougher. Offenders are typically fined between £150 and £200 with time to pay and this is appreciably less than the average car insurance premium – this cannot be true justice!

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What if i am a Young Driver
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In April this year the Government is forcing dentists to accept a new pay scale and changes to their working arrangements.

Now dentists are not known as a belligerent profession, but there’s widespread disbelief amongst them at the Governments heavy-handed action. And they’re resolved not to be bullied. As a result thousands of dentists are refusing to accept the new terms and are planning to quit the NHS at the end of March.

For clients the result will be mayhem. Many asking to be treated on the NHS will simply be turned away. Those dentists who do accept the new NHS contract will have treatment waiting lists a mile long.

So, if you need emergency treatment for a broken tooth or an abscess, you’ll be forced to search out a community dental service operated by the NHS itself. For most this means a long journey to find one with hospital style waiting on arrival. Dental treatment will simply take you the whole day!

For many that leaves private dentistry as the only alternative. That means you’ll get an appointment when you want one rather than waiting for ages on the NHS. But it can be expensive. The only good news is that there are ways to keep costs manageable.

You basically have three main options: dental insurance, capitalisation schemes or cash plans. Let’s explain.

Dental Insurance
In response to the market place, there are now a growing number of insurers offering dental insurance. The following are typical examples:

Western Provident has been offering dental insurance for many years. Its Providential scheme provides a basic level of cover with fixed monthly premiums for those aged between 18 and 49 of £12.48. Premiums rise with age up to £15.90 per month for those aged 50 to 69. Policyholders have to pay the first 25% of all costs but are able to claim up to £250 per year towards routine treatment including check-ups, visits to the hygienist and fillings. You can also claim up to £1,000 per year for emergency treatment including accidental dental injury but the payout is limited to £250 per treatment.

Universal Provident offer basic insurance from £6 per month. This covers up to £1,000 per year on routine work but will not pay for check-ups. Dental emergencies are covered up to £5,000 per year and accidental damage up to £1,000.

Lots of policies also limit the number of treatments they will pay for each year. A policy from Boot’s limits claims to two check-ups, four fillings and one crown a year up to £500. Their policies cost from £9 per month.

Capitalisation Schemes
These are more expensive. Before taking up the policy, your dentist makes an assessment of your dental condition and places you in one of five treatment categories. This will determine how much you pay. The poorer your dental condition, the more you pay.

For example, Denplan’s dental care policy costs between £9 and £30 per month with, we are told, an average fee of £16.

Cash Plans
The third alternative is a composite health cash plan which includes dentistry. Health cash plans pay towards a wide range of health treatments; for example, dentistry, opticians, hospital treatment, physiotherapy, chiropody and allergy testing. The policy spells out exactly the maximum value that can be reclaimed each year for each type of health treatment and most cash plans offer three or four grades of benefit level. The more you pay, the more you can claim back. Some cash plans allow you to reclaim 100% of the cost up to the annual maximum per health category, some will only pay a percentage. For examples of cash plans visit www.hsa.co.uk and www.securehealth.co.uk and click on cash plans. Within these policies, the maximum cover for dentistry tends to be in the range of £70 to £200 per year.

Searching for a Dental Plan
As with all sorts of insurance, you’ll find it cheapest on the Internet. Search for “dental insurance” but make sure you’re using the UK variant of your search engine – otherwise you’ll come up with thousands of American web sites!

The best sites to visit are either those, which enable you to compare plans or where you can make it easier for yourself by using a specialist dental insurance broker. With these brokers, you submit your details and they’ll tell you the options and best dental policies available for you. If you do want to apply direct to an insurance company, you can still do it on the Internet - but there’s no guarantee that you’ll stumble on exactly the best policy for you amongst the many hundreds available. We recommend the broker route.

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More Dental Insurance Faq’s

Further reading How does Dental Insurance Work ?
Futher reading What is covered by Dental Insurance ?

Please be particularly wary about card security whilst you’re abroad, especially in Eastern Europe. Card fraudsters love business travellers and holidaymakers. That’s because they have that bit more time to use the card before it’s blocked. Chip and pin technology is a major problem for fraudsters but there are still risks to watch out for. A report we read recently highlights the problem.

Mr C was on business in Prague when a pickpocket stole his wallet. It was highly inconvenient but not he thought, the end of the world. He thought that the chip and pin technology would protect him. Imagine his horror on returning to the UK, to find that within three days of losing his wallet all his credit and debit cards had been emptied of thousands of pounds. How’s that possible?

Well, it’s a rather common fraud. A trained fraudster had watched and recorded the pin number he used at a cash machine and a pickpocket accomplice had followed him from the dispenser to steal his wallet. Armed with both the credit card and its pin number, the fraudsters had a field day. That’s because Mr C, like 1 in 3 of UK cardholders, uses the identical pin number for all his cards. Naturally, the fraudsters tried the known pin number on all the cards in the wallet. Hey presto – they all worked!

And yes, it also happens in the UK.

So, two points here. Always be very security conscious when you use your pin numbers - not only abroad. Secondly, use different pin numbers for your cards. Work some easy way of remembering them. For example, use the first, second, third and fourth numbers from each of the numeric clusters on the card or some combination from them. Or better still, if you have a better memory than me, memorise a number for each card!

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More Articles On Credit Cards
More Credit Card FAQ’s
Further reading - What is sentinel card protection ?

Going on holiday to France, Italy or Spain this year? Then beware of a new trick to overcharge your credit or debt card.

Many retailers and restaurateurs in these countries now have the ability to ask you to authorise your bill in euros but then they charge your card in £sterling. This may sound innocuous but there’s a sting in the tail. The retailers charge you an additional fee of up to 4% for the service! The service is called “dynamic currency conversion”.

Guidelines from Visa say that British cardholders should verbally be given the option to either have their card charged in euros or to authorise in euros and then be charged in £sterling when the transaction goes through. In practice, it seems that few of us are being offered the alternative. Many retailers are automatically charging us in £sterling - and with the extra fee! The lack of explanation may be down to the language barrier but we are a little more cynical than that! Even where an explanation is given, we doubt whether many retailers and restaurateurs will clearly spell out their extra service fee. After all to them, extra profit is extra profit!

Our advice is that when abroad in France, Italy or Spain, always insist that your credit card transactions are processed in euros. That’s because some UK card operators such as Saga, Lombard Direct and Nationwide will convert euros to Sterling completely free of charge. Others, such as cards from our high street banks, do charge a mark up of 2.75% called a foreign currency loading fee – but even that’s cheaper than the retailers 4% dynamic currency conversion charge.

In fact even with a 2.75% loading fee, it can still be cheaper to shop with your credit card rather than converting your cash before leaving these shores or converting it abroad at the bureau de change. That’s because the exchange rates used by Mastercard and Visa are often far better than you can get for your cash and travellers cheques. And don’t be fooled by the commission free slogans outside the bureau de change. They might not charges fees but their currency rates are never too cheap – after all, how else can they make a profit?

And here’s another bit of useful advice. Unless you have an emergency don’t use your cards to withdraw local currency. That’s because you’ll be charged interest from the minute the cash leaves the cash dispenser. Remember, there’s no interest free period on cash withdrawals.

Not looking forward to opening the post? Dreading the Bank Statement and the bills? Then the odds are that your finances are becoming a problem.

There’s never a better time like the present to tackle a debt problem – as soon as you get that knotted feeling in your stomach, face the problem head on. Here’s some good practical advice.

Save on your Credit card bills

Savings can be found by switching your balances to cards with lower interest rates. Take advantage of the 0% deals on balance transfers such as those offered by Mint – they’ll give you 10 months interest free but with a 2% balance transfer charge. The best transfer free 0% deal without a balance transfer charge comes from Marks and Spencer. Their deal lasts 6 months.

And ensure the interest you pay on any new purchases is reasonable – better still, now you’re cutting back, try not to use your card at all! If you do expect to use your card a bit, then HSBC offers 0% on balance transfers and new purchase for 9 months but again they have a 2% balance transfer charge.

The credit card companies may hate you for it but regularly move your balances between cards to take full advantage of their deals. When you’re a month off the end of a deal, start looking for a new card and get the balance transferred.

Cut down your monthly expenditure with a Debt Consolidation Loan

The purpose of a Debt Consolidation Loan is to take all your existing loans and credit card balances and roll them together into one loan that gives you a single lower monthly payment. This is achieved by reducing the overall rate of interest you pay and spreading the loan repayments over a longer period of time.

But as with everything there are pitfalls to watch out for. When you’ve transferred the balances to the Debt Consolidation Loan, don’t start reusing the old credit lines you’ve just paid off. If you do, you’ll simply end up digging yourself into another hole and make your situation much worse!

And there’s another aspect to consider. If you’re consolidating into a fairly big loan and you’re a homeowner, the lender may want to secure your debt against your home. If this is the case, think carefully. Remember, if you fail to maintain the agreed repayments, the lender can apply to the courts to force you to sell your house. That would not be good news!

Seek help

There’s lots of help available to assist people resolve their debt problem. A good starting point is the Citizens Advice Bureau. They’ve 3,200 branches throughout the UK so the odds are there is one near you.

Then there’s the National Debtline. This is a free, confidential and totally independent source of advice. Call them on 0808 808 4000 or visit their web site www.nationaldebtline.co.uk. There you find a free information pack with a personal budget section, debt advice and free fact sheets.

You can also try the Foundation for Credit Counselling. Based in Leeds, it’s the umbrella charity for the Consumer Credit Counselling Service. Through its free national telephone service and eight centres, CCCS is able to help people with debt problems wherever they live. Their specialist advisory service has already helped thousands of people in the UK by providing counselling on personal budgeting, advice on the wise use of credit and, where appropriate, managing achievable plans to repay debts. Look up their web site at www.cccs.co.uk or call them on 0800 138 1111.

Debt Management Plans

If you have debts exceeding £5,000 spread across three or more creditors, a debt management plan could be something worth considering. But you’ll need to be able to put aside at least £100 per month to help settle the debts.

Basically, you agree to pay your creditors a single fixed amount each month. A debt management company then receives this sum and allocates it between your creditors. In return, your creditors agree to freeze the money you owe so no more charges or interest pile up.

Some debt management companies charge you a fee for providing this service but others, including the Consumer Credit Counselling Service and the National Debtline, are paid by the creditors.

Individual Voluntary Arrangement

An IVA is a formal agreement made through a county court to pay off your debts. In return for your creditors writing off a portion of your debt, you pay an agreed monthly sum for between 3 and 5 years. You can also make lump sum payments during the period and this will shorten the IVA period.

But IVA’s aren’t for everybody. They’re best suited to people who have a reasonably high level of income or a lump sum to contribute as the set up costs can run into several thousand pounds. And if you fail to maintain the agreed payments you can quickly be made bankrupt. A specialist Insolvency Practitioner handles all the negotiations regarding the value of your debt to be written off and they also administer the payments to your creditors.

Bankruptcy

This must be the very last step but it is a step that more people are choosing – in the last twelve months, bankruptcies have increased by a third.

In a bankruptcy all your assets, including your home, may be sold to repay your creditors. Then after a year, all your debts are written off and you are free to rebuild your finances. But the record of your bankruptcy will remain on your credit history maintained by the big credit agencies such as Experian and Equifax for seven years. This will decimate your credit rating and for the first year or two, make it very difficult to obtain a mortgage or any other form of credit.

No we’re not insensitive – we’re talking about your last gasp of smoke – have you given up smoking?

Smokers pay up to 60% more for their life insurance cover compared to non-smokers. So, besides the health dividend, life insurance companies will chip in with lower premiums. And the saving isn’t to be sneezed at! It could typically amount to £10 or more per month.

Most insurance companies say you’re entitled to non-smoker premium rates if you’ve not smoked or otherwise used nicotine products, within the last five years. If you’ve only just given up smoking you’ll have to wait for the extra spending money.

But sometimes there’s a way of speeding things up. Some insurers have adopted a more relaxed definition of a non-smoker by shortening the 5 year abstinence period to just twelve months. So if you’ve been fag free for a year, find out whether you can move your life cover to one of these insurers. But you have to be careful. Never cancel your existing policy until you’ve received written acceptance from your new insurer.

How do you swap insurers?

First of all, to get the best price, you need to go on the Internet and find a life insurance broker that provides help, discounts price and searches the whole insurance market for the lowest prices. If you use a web site that provides an on-screen quote, you won’t know whether that insurance company that comes up uses the 5 year or the 12 month smoker definition. Online systems never tell you. To be sure you need to chat on the phone to a life insurance adviser.

Then ask for a quote. If the quoted price looks cheaper than you’re currently paying as a smoker, put in a full application. One of the main aspects that conditions your premium is of course, you age. Therefore, if your original policy was put in place many years ago, the savings could be quite a bit less than the 60% we have indicated. You’ll just have to get a quotation and find out! As all brokers are only too pleased to provide quotations, and these are always free and without obligation, what have you to lose?

Having found an attractive quotation from an insurer with a 12-month smoker definition, you’ll have to complete a full application. Read every question carefully and answer all the questions fully and honestly. Far too many applicants try to ensure a low premium by being “economical with the truth” on questions that might otherwise not read too well for them! Don’t be tempted.

Over the last few years insurance companies have also become far more picky about whom they allow to have standard terms – that’s the first price they quoted you. Their selection rules about weight and health have become far tougher resulting in lots more clients having their premium loaded. That’s why you mustn’t cancel your existing policy until you have got a final acceptance at a price that gives to that saving you’re looking for.

Whilst the switching process may sound a little daunting, it isn’t really. In any case if you end up with big savings, it’ll provide an extra reward for the stress of giving up.

Good luck.

From 14th February, most shops and petrol stations will not accept signatures from customers who use a chip and pin credit card – with one major exception. Tesco’s are planning to continue to accept without pin numbers.

Tesco clients buying at their check-outs and petrol stations can spend up to £60, simply by swiping their debit and credit cards through an old fashioned card reader. Pins and signatures will not be required.

This means that the criminal fraternity can continue to use cloned or stolen cards up to and beyond the 14th February deadline. A spokesman for Tesco’s said “ we see low levels of fraud in these areas and if someone uses a card which has been notified as stolen, it will be rejected”.

Tesco’s have also said that chip and pin terminals are being introduced but it will be the end of 2006 before the process is completed across all their 800 self service stores and 370 petrol stations. It seems as if the 14th February deadline has caught Tesco’s on the hop.

A spokesperson from the Association for Payment Clearing Services said, ”There is no legal requirement for retailers to use chip and pin but if there are opportunities which criminals can exploit they are likely to do so. The vast majority of retailers now use chip and pin”.

Maybe so – the majority it seems, except for the UK’s biggest retailer!

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By MICHAEL CHALLINER

Limit your Mileage
If you know reasonably accurately the mileage you are likely to drive next year, get a policy which limits the cover to just the number of miles you know you’ll need. You might find that’ll give you a good saving. But remember, if you exceed the mileage limit, you are not insured.

Make sure you protect your no-claims discount
If you’ve built up a decent no-claims discount, don’t put it at risk. Don’t risk losing it after an accident, it’s far too valuable. Add no-claims protection to your policy. It’s unlikely to cost much.

Drive slower
We know it’s hard, especially with all those roadside cameras around, but try your hardest to keep a clean licence. Persuade yourself to drive slower! Even three penalty points are taken into account when the insurance company in calculates your insurance premium.

Shop around every year
When your annual renewal notice arrives, shop around. Just because you got a cheap quote last year it doesn’t mean that the same insurer will continue to be the cheapest. Insurers are constantly changing their rates. So it’s still likely that you’ll find a lower premium. Time spent on the Internet will be well spent. Research shows that the cheapest premium could be half the price of the most expensive.

If you want to cut the hassle, go to our car insurance page where we’ve whittled down the insurers to the cheapest for each category of driver. So, if you want a general quote, or a specialist quote for a young driver, high performance car or a quote for a lady driver, mature driver or careful driver, or a classic car etc, Click Here

We have detected that mortgage lenders are increasingly turning to the well tried marketing technique of “carrot and stick” to attract borrowers and persuade them to remain loyal.

The technique involves offering a mouth-wateringly cheap initial rate of interest and then encouraging the borrower to stay on beyond the introductory period by imposing punitive penalties if the borrower redeems the mortgage within a set number of years.

Take the Portman Building Society for example. It’s offering borrowers an interest rate of just 1.95% fixed for two years – but thereafter, you must stay with the Society for a further four years paying base rate plus 1.99%. This currently works out at 6.49%. If you want to move before the end of the sixth year there are swinging penalties ranging from 7% to 2% depending on when you make the move. This means that a borrower with a £125,000 repayment mortgage over 25 years would start off paying just £530 per month based on the current base rate. Then after the initial two year introductory offer, monthly payments rise to £854. That’s a rise of 62%.

If you prefer an interest only mortgage (see yesterday’s Blog), then the payment hike after the introductory period, is even more savage. Payments rocket by 233% from £203 to £676 per month.

But it seems that the vast majority of borrowers choose to stick with these sorts of deal. According to a spokesman from the Portman, these mortgages suit borrowers who want to defer the full cost of a mortgage for a few years and 90% stay loyal after the fixed rate ends. We think that simply means that 90% of borrowers can’t face paying the swinging penalties!

If you think you’ll find these hikes too much to stomach, you should consider the best of the two year deals without extended penalties. Take a look at the Yorkshire Building Society – they currently offer a 4.38% deal and you can move without a fee.

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