Can you reduce your credit card debts?

Millions of us are now struggling to pay off our credit cards. The good news is that as the numbers rise, banks are increasingly agreeing to reduce or even remove your debts. We highlight where you can go to get help.

BANKS wrote off an enormous £1.18 billion of card debt in only three months at the end of last year.

That’s up from £740 million in the previous quarter, and up from £894 million during the same period in 2009. The latest figures from the Bank of England show how UK banks are more willing to help those struggling with huge credit card bills.

But this certainly doesn’t guarantee that your debts will be written off. Banks will look closely at whether you can’t pay rather than won’t pay. If you’re squandering your spare cash, you’ll still be expected to meet your payments. Also, having your debts written-off will still damage your credit record.

As millions of borrowers struggle to bring down their card and loan debts, debt helplines and management agencies have seen a huge rise in the number of enquiries.

Steve Rees, managing director of private debt management agency Vincent Bond & Co, comments: “These statistics echo the trends we are seeing at Vincent Bond as the banks, and the collection agencies who represent them, are becoming more prepared to accept settlement offers, with larger amounts of the debts written off.”

As with most other private debt agencies, Vincent Bond charges every customer a fee.

However, there are several charities and government bodies who provide debt advice and management services for nothing. For example, the Consumer Credit Counselling Service and National Debtline are registered charities that provides free, impartial advice to people struggling to repay debts.

Citizens Advice, which also provides free independent advice, has raised concerns with the Office of Fair Trading (OFT) about a number of bad practices used by some commercial debt management firms. These include persistent cold-calling of consumers and taking unauthorised upfront fees.

A CCCS spokesman explained that if people have the ability to repay their debts, instant write-offs are not something they would advise.

Debt advisers put those who can pay their bills onto a debt management plan. They will negotiate with your creditors to make repayments more manageable - interest and other charges are often frozen while you get on a better financial footing. Then you make one monthly payment to the organisation which distributes it among your creditors.

The important thing is that you don’t stick your head in the sand: If you’re in financial trouble, it’s crucial to get professional, impartial help as quickly as possible.

Credit Card Debt Management: How to Avoid Damaging your Credit

Once you have that thin rectangular piece of plastic, you already feel that you have the license to shop till you drop. While this experience may be fun in some instances, people tend to forget that they have to pay for it. One great shopping trip can then turn into a horrible regrettable event. Not only will this lead you to a great amount of debt, it also wreaks havoc on your credit score.

If you want to maintain a good credit score, it’s advisable to avoid late payments as much as possible. If late payment is your form of habit, get ready to kiss your 3 digit credit score goodbye? How can one pay on time then? Monitor your purchases.

What’s worse than late payments? Missed payments, of course! Forgetting to pay their credit card dues will lead to late payment fees. Some companies even issue high interest rates for missed payments. And so, the solution for this problem is the same as the one listed above: monitor your purchases. Exercise self-control as well. If you need to prioritize on gas and other necessities, then don’t think about buying Chanel. Wait for the time when you’ve organized your budget and expenses. Once you have paid your debts, you can then allow yourself a much deserved treat (in moderation, of course).

Trade credit insurance for small businesses launched

Towergate is offering trade credit cover aimed at small businesses and is letting them self-police customers over late payment
Cut price trade credit insurance designed specially for small businesses has been launched by a leading insurance broker.

The product costs almost half the typical annual premium and covers up to £350,000 of turnover from the risk that a customer becomes insolvent and cannot pay.

Towergate, run by entrepreneur Peter Cullum, estimates that up to one million small businesses could benefit.

The cover is underwritten by credit insurance giant Atradius and to start with will be available to all sectors apart from construction and clothing.

Gavin McClaren, Towergate's divisional director of credit, said: "At the moment a traditional credit insurance policy premium would start at £3,000 and go upwards, which for a small business is too high a cost. Normally that's allied with a high excess per claim of £500 to £1,000."

"Our product has a premium of £1,870 a year and an excess of £250. That opens a far larger part of the ledger to cover."

Towergate's policy tackles business concerns that credit insurers withdrew cover on a large customer during the recession without any notice or evidence of a change in payment behaviour with particular suppliers,

It is letting companies self-police their policies and cannot withdraw cover on a particular company without any direct evidence that there has been a change of payment behaviour affecting the policy holder directly.

Small businesses have to notify Towergate if a customer pays later than 30 days beyond agreed contract terms during the last six months or risk the cover being invalidated.

Mr McClaren said: "This is a big step for the insurance industry. They are giving up the monitoring to the policy holder. They have no control over what they are covering and what they are not."

The policy does not have any insurer approved credit limits but does come with a maximum liability of £20,000 a year and maximum individual claim of £10,000.

Mr McClaren said: "The impact of a bad debt on a small business can be massive. If you have a 10pc profit margin and sustain a £10,000 bad debt that means you would have to achieve another £100,000 of sales just to standstill."

Banks go to court to defy regulators over mis-selling of credit insurance

BRITAIN'S banks have picked a new fight with financial regulators in the hope of avoiding multi-million pound compensation claims following the mis-selling of credit insurance.

The British Bankers' Association announced on Friday that it was going to court to block new rules on the way compensation must be paid due to come into force in December.

It will ask the court to judicially review guidelines laid down by the FinADVERTISEMENTancial Services Authority (FSA).

However, the FSA immediately announced it will contest the bankers' action, and advised institutions to continue handling complaints as they have been ordered. The Financial Services Ombudsman, which can adjudicate disputes unresolved by the banks, said it would continue operating as normal.

Credit insurance, to protect against sickness or unemployment, is believed to have been widely mis-sold, via hidden charges on credit cards, personal loans and other debt.

Peter Vicary-Smith, chief executive of Which?, said: "The BBA's taxpayer-backed members should take a long, hard look at themselves and ask why they continue to wage this ridiculous war on consumers."

Elsewhere, it has emerged that more than half of all current accounts no longer pay interest, according to Moneyfacts.co.uk.

Current account customers typically receive just 0.77 per cent interest compared with an average rate of 1.43 per cent five years ago. A total of 55 per cent of current accounts pay zero interest to customers who are in credit. A further 28 per cent pay 0.1 per cent or less.

Rate stays at record low
THE Bank of England held UK interest rates at the record low of 0.5 per cent for the 19th consecutive month.

The bank also voted to hold the £200 billion quantitative easing programme at its current amount. Rates have remained fixed since March 2009.

Cut in tracker rate
BARCLAYS has cut its lifetime tracker mortgages by up to 0.41 per cent to celebrate mortgage lending hitting £100 billion. The new rates start at Bank of England base rate (currently 0.5 per cent) plus 2.08 per cent, giving a pay rate of 2.58 per cent, on life time tracker mortgages with a 30 per cent deposit and a £999 fee.

HSBC cut rates on all its 80 per cent loan-to-value mortgages by 0.4 per cent. All the products, which require only a 20 per cent deposit, have booking fees at £399 or less. The bank also introduced a two-year discounted mortgage at 2.79 per cent with a £99 fee.

Lloyds TSB Scotland launched its lowest ever three-year fixed-rate mortgage at 3.99 per cent. The product is available to first-time buyers, house purchasers and remortgagers with a 30 per cent deposit. The deal charges an £895 fee.

India's Regulator Suspends Sale of Credit Insurance

India's Insurance Regulatory and Development Authority has stopped the sale of credit insurance by nonlife insurers due to reports of malpractice and inadequate information for the selling of the products.

Nonlife insurers sell credit insurance to banks offering credit facilities to debtors. IRDA said "it is observed that such covers appear to be in the nature of credit default insurance," and such covers need a different regulatory treatment.

"After examining the credit default insurance contracts IRDA has come to the conclusion that the insurers are underwriting risks which do not have proper regulatory framework or sanction," said IRDA, in a statement.

The regulator has ordered all nonlife insurers to stop selling credit insurance until the authority develops detailed guidelines. IRDA said it will seek details of total credit risk exposure of companies and information provided with credit insurance policies issued by nonlife insurers to banks.

The sanction does not apply to Export Credit Guarantee Corp. of India Ltd., a government-owned company that provides export credit insurance support to Indian exporters.