Credit and store cards: the dangers

Over the years Britain has become increasingly reliant upon credit, and many people have started to rely on plastic in the form of credit and store cards. This type of credit can be very useful when used properly and when willpower is exercised, but spending on the plastic can very quickly get out of hand, which can – and has – led to people finding themselves in huge levels of debt very quickly.

There are people that are able to spend widely on credit and store cards, and then repay their spending at the end of each month, which means that they get to enjoy the ease, convenience, and flexibility of credit cards without the added charges and high levels of interest. However, there are also consumers that have little or no control over their spending, and these are the people that can find themselves adversely affected by spending on the plastic.

Many people manage to clock up thousands of pounds worth of debt on credit and store cards, and then can only afford to make a minimum repayment on their cards. This means that you could be paying off your credit and store cards for many years – even decades. In fact, some people clear their mortgage before they manage to clear their credit cards, which reflects just how costly these cards can be in the wrong hands.

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Beware of the debt that can outlive you

"During the last generation, we have moved from an era where credit was hard to come by, where people saved up to make large purchases and where many more people lived within their means, to now where we see credit being used by many as an essential tool to meet day to day living and to make those more expensive purchases...

"But by relying on plastic to supplement to our income, rather than to manage our cash flow, it's easy to see how some people can be caught in a debt cycle, facing a lifetime of debt. In August it was reported that £53.4 bn was owed on credit cards, with 74.3% incurring interest, based on an average rate of 14.9%.

It is easy to see that it's a lucrative business for the card providers, taking a slice of a £6 bn annual interest bill.

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Visa clashes with retailers over standards for credit card safety

The credit card security debate is coming to a head.

According to the most recent data, fewer than half of major retailers were on track to meet a Sept. 30 deadline set by Visa USA to tighten the security on their data systems, increasingly targeted by hackers and scam artists.

The low rate means many merchants face higher fees from Visa, the largest credit card network, and potentially fines from banks that handle payments when customers use plastic at the cash register.

In response, the National Retail Federation, a trade group representing the largest merchants, yesterday called on credit card security officials to change procedures under which they store some data, which they said creates many of the vulnerabilities.

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0% Cards With No Balance Transfer Fees

One thing we at The Fool are very keen on is getting a good deal from financial providers. Even better, we love it when we can make money from them - which would probably explain our love for the 0% credit card.

For anyone that doesn't know, there are essentially two types of 0% credit card. The first is the 0% card for new purchases, which does exactly what it says - take out one of these cards and you'll typically get up to a year to make purchases on the card, interest free.

Provided you pay off the minimum amount each month without fail, you'll be able to squirrel away the rest of the money you've spent into a high interest savings account, and pay off the card in full when the 0% period expires. Any interest made is yours.

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How I Kicked the Credit-Card Debt Habit

Credit-card debt can stockpile for all kinds of reasons. Mine seemed innocent enough -- after all, I wasn't buying Manolo Blahnik shoes on a journalist's salary à la Sex and the City. Shopping trips didn't help, but neither did years of traveling to visit far-flung friends, multiple bouts of moving expenses while job hopping from city to city, and a stop for more education.

I also bought into the rhetoric that everyone has revolving credit debt. Why worry about having to pay now, when I could just pay later, right? It's not like we live in the Charles Dickens era of debtor's prisons.

In fact, in the eyes of my credit-card companies, I was a model cardholder. I had small balances sitting on multiple cards and always paid my minimum payments. Along the way, I did pay off some cards, and my credit score didn't suffer. But I never focused on completely erasing the debt.

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Selling Students into Credit-Card Debt

Citibank (C) pitched an offer at Ohio State University that few college students would refuse: free food. A company hired by the bank plastered the Columbus campus with advertisements for free sandwiches at a local haunt, Potbelly, and free burritos from La Bamba restaurant. The only catch? Students had to submit a credit-card application before any free food crossed the counter.

The food-for-credit application scheme caught the attention of Ohio's attorney general, Marc Dann, who sued Citibank on Sept. 19, alleging that the campus advertisements violated the state's consumer-protection laws. Dann has partnered with students and professors at Ohio State's Moritz College of Law to prosecute the suit, which accuses Citibank of using bait-and-switch advertising, failing to clearly state conditions of the offer, and tempting students with a prize without disclosing all the conditions.

The suit seeks more accountability in credit-card marketing practices. "Citibank is starting out the marketing deceptively and banking on the fact that these kids won't read the fine print," Dann says.

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The great credit card debate: Frequent flyer miles or cash rebate?

For many consumers, choosing a credit card comes down to choosing a future stream of awards. Among these awards, two of the most popular are frequent flyer miles and cash back.

It's always financially prudent for miles collectors to ask whether there are more lucrative rebates to be had outside the realm of travel rewards. However, it's even more important now, in light of the significant decline in the value of frequent flyer miles in recent years.

All travelers should consider whether it would be a better deal to trade in their airline card for a cash-back card. Or, perhaps, the best move is to carry both.

A range of rebate cards

Among the many credit cards that use cash rebates as their central selling point, the following three represent a sample of the options available to consumers.

First, the Discover More card from Discover is a descendant of one of the original rebate cards. It takes a tiered approach to awards, rebating 0.25 percent on the first $1,500 in yearly charges, 0.50 percent on the second $1,500, and a full one percent on charges exceeding $3,000.

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Credit Card Debt: Get Rid of it by These Simple Steps

Credit card debt, is not an unusual situation and we can find people everywhere, who are suffering from this very problem. Getting into debt is very easy, just a quick spending spree and you will reach this hell, but getting out of a credit card debt takes a lot of discipline and will.

However, nothing is impossible and anyone can get rid of the credit card debt provided he follows these basic things.

Discipline is the first thing to begin with. Yes, usually it is the wasteful expenditure and uncontrolled spending that lands a credit card holder into credit card debt.

Taking a pledge to control your credit card spending unless you get out of this credit card debt will put you on the right track.

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Caught in the card trap

Saugata Roy, a webmaster at a Calcutta-based media company, had resolved never to own a credit card. First of all, he didn’t like the idea of being under the burden of credit and, secondly, he did not understand how the system worked. But his resolve was not to last for long. A smart agent of a credit card company persuaded him to opt for a “lifetime free” credit card.

Roy had no idea that this would be the start of a long and harrowing experience. “I was told that the card would be active for life even if I didn’t use it at all. But in less than a month, they started calling me regularly, urging me to make at least one transaction for it to become active,” he says. So Roy paid through his card once and thought the matter had ended there. But it was not to be.

A few months later, the bank began to press him to go for a family insurance policy of ICICI Prudential that was being offered at a discount to the card’s customers. Initially, Roy said that he was not interested. “But they kept on nagging me and in sheer frustration I said ‘ok, send me the details’,” he says.

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