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Tuesday 23 December 2014

Here's how to avoid being stung with a higher Christmas credit card bill

BANKS increasing charges? Whatever next.

OK, I know we've come to expect being ripped off by banks but the announcement by Bank of Ireland that it's to add a whole set of increases on its credit card products a week before Christmas still smacks of the old Ebenezer Scrooge.

Debt

Knowing people are piling on debt at this time of year means they get more money when it can't be repaid.

Interest rate increases of 0.7pc right up to 4pc have been slapped on a range of cards.

Naturally, the biggest increase has gone on the card with the lowest rate -- bringing the 'Clear' card from a quite reasonable 13.8pc to an eye watering 17.8pc.

Credit card debt remains stubbornly high -- as is all personal debt in this country.

We collectively owe an average of €1,274 on plastic according to the last figures issued by the Central Bank.

Based on Bank of Ireland's new card rate, and minimum payments of 2.5pc, it would take 63 months to clear a bill like that.

That's not until March 2018.

Now part of the reason the bank has hiked its rates is precisely because people are taking so long to repay debt.

Banks call these people "high risk loss profiles" and ironically in one way, they're actually the "best" customers as they make the bank the most money over the longest period -- but if they cannot pay, it's expensive to chase them down and get the bill cleared.

Most of us don't pay our whole bill off by direct debit every month as we should so interest on interest racks up, making it harder to do so.

There are, however, some things you can do to at least make it easier for yourself to manage a credit card bill in the new year.

All require discipline, but you'll be making new year's resolutions about getting more exercise and eating less, right? You'll be in the mood for a little pain.

Firstly, switch your balance to a card with no interest for a period of time. Permanent TSB's Ice card and Tesco's Clubcard credit card both offer 0pc for 6 months on balance transfers.

Their normal rates are 17.3pc and 19.1pc outside of this so do NOT put anything new on the card.



Classic

Instead use the six months to pay down the existing debt by using whatever you would normally pay, with interest.

Cards with low rates for balance transfers also include AIB 'be' and Ulster Bank's Classic with rates under 4pc for 12 months.

If you're finding it really hard to cope, do not be afraid to contact MABS, your local Credit Union or your Community Welfare Officer.

All will offer sound advice about managing debt into 2013.

But with less than a week to go before the big day, if you're finding it really tough, it's also not too late to contact your local St Vincent de Paul who can offer immediate financial assistance.

Using any savings you have or even your overdraft, is preferable to using credit card.

MABS is great for debt management advice in 2013. Do not spend any money on any other debt management service -- there's no need.

Consider using only pre-pay money cards next year.

Load up in advance, use like a credit card, in stores or online but you can't get into debt.

Moneybookers, Neteller, 02 and Ryanair all offer these, but watch out for charges to set or load them up. Bonkers.ie have a good comparison page.

Make a resolution to use your debit card in 2013 for ordinary purchases.

Credit cards are fine for big ticket items you have a plan to repay, but never put the weekly shopping or a round of drinks on it -- it just stacks up.



dramatic

And finally, either cut the card in half (horizontally, so you can use it online, but not in a shop), or freeze it (in a plastic bag suspended in a tub of water).

Defrosting lets you really think about that purchase.

Sounds dramatic? Not as shocking as some of the rates you'll be paying on the debt.

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