Recently, debt consolidation has become popular among the UK people. Many borrowers in the UK are being interested in consolidating debts. No doubt, debt consolidation is the ultimate way to solve all debt puzzles. But some borrowers prefer to take some advice before going for consolidating debts. Here some advice are introduced for their favor.
What is debt consolidation?
Debt consolidation is a part of debt management. In this process, generally borrowers in the UK consolidate all their debts into a single debt and quench their debt burden. With this procedure, borrowers take a different loan that covers all their unpaid debts. Afterward, borrowers need to make payment only on that single loan instead of various ones. Thus, debt consolidation helps all borrowers in the UK to regulate their debts. Besides loans, debt consolidation can be done through mortgage, remortgage, credit card etc.
What kind of debt consolidation loans is apt one?
Normally, two kinds of debt consolidation loans are available in the loan market of the UK. These are, secured debt consolidation loans and unsecured debt consolidation loans. Secured debt consolidation loans are obtainable against a security and undoubtedly for that, these loans are offered at lower interest rate. Therefore, if any borrower in the UK wants to consolidate his debts without spending extra money, then secured option is better option for him.
On the other hand, no collateral is required for unsecured option. Its interest rate is usually high due to the absence of security. As security is absent for unsecured option, thus these loans are appropriate one for those who are non-homeowner or do not want to take any risk with their property.
What benefits are available?
The benefit list of Debt Consolidation Loan is truly vast. The main pros of these loans are as follows:
- Cost-effectiveness as it reduces the interest rate
- Eradication of various payments.
- One loan and one lender facilities.
- Ending of untimely and harassing calls of lenders.
- Helping hand for the UK borrowers to live a debt-free live.
Where to apply?
Easy availability of debt consolidation has made it famous in the UK. Many traditional lenders in the UK are offering these loans. But, it can be said for advice that online debt consolidation is the best option that one can opt for. With this option, borrowers in the UK do not need to spend much time for getting a favorable offer. By clicking the mouse, he can apply for a best loan within few seconds.
At the end, one more advice is referred for all the borrowers in the UK. Debt consolidation is a good option to manage debts properly but at the same time all borrowers should not forget to check their financial capacity while thinking about this option. And last but not the least, consolidating all debts may not be profitable, especially those loans have low interest rate. If one's debt is ₤5,000 or more than it, then this option will be fruitful for him.
Saturday, July 6, 2013
Northern Rock - A Bank Built On Sand?
The confirmation by the Bank of England of support for Northern Rock plc on 12 September 2007 is the first major sign of international fallout from the collapse of the US sub prime mortgage lending market.
In the US, lenders such as New Century Financial Corporation, the second largest sub prime lender in California, have gone bankrupt. In the UK, as Northern Rock is classed as a bank, the authorities intervened in order to prevent market panic. There have been persistent rumors that several leading UK banks, including Barclay have liquidity issues and the Bank of England wished to send a clear signal that no major bank will be allowed to fail.
The irony of Northern Rock is that it was generally deemed to be a successful company. The share price was GBP12.58 in February, but by 14 September 2007 it had dropped to GBP4.33.
Northern Rock achieved sales growth by offering 100% mortgages on home valuations, plus an extras 25%. Their projected growth rate was 20% per annum and yet the market was only growing at around 10%. In order to gain this volume of business, they needed very attractive mortgage products and also to adopt a flexible approach to consumers with mixed credit records.
They were so successful that they gained 22% market share of all new mortgages taken out during the first 6 months of 2007. The growth in the issue of mortgages was primarily funded via the wholesale market, as opposed to deposits by individual savers. It is estimated that some 75% of funds come from this source. The near collapse of interbank lending in August effectively starved Northern Rock of funds and caused a liquidity crisis.
In comparison to the US subprime scene, Northern Rock appears almost prudent. New Century of California took such a lenient view on customers' poor credit ratings that it allegedly would make advances to a person who came out of bankruptcy on the previous day. Northern Rock, on the other hand, has not been accused of failures of diligence in its lending policies and mortgage risk assessment methods. Northern Rock has not been hit by mortgage defaults, but by a lack of finance which is required to fund its ambitious expansion.
The housing market in the UK is now set to follow the downward trend of the USA. Prices have dropped by more than 10% in some locations such as Stockton, California, where the repossession rate is running at 3.7% of households.
Despite the differences between Northern Rock and the bankrupt US mortgage lenders, the root cause remains the same. This is the persistent growth of consumer debt.
In the UK, the average level of household debt, excluding mortgages, is GBP8, 856. Average household debt is GBP56,000 if mortgages are included. It should be noted that these are average figures and they include a large number of households who do not have mortgages or credit card balances.
Some 11.8m UK households have mortgages and the average amount outstanding is GBP96,560. In addition, if non mortgage debt is limited to the households with unsecured loans, mainly credit cards, then the debt figure rises to GBP20,600. Therefore the average total debt of households with mortgages and credit card loans is a staggering GBP117,160.
Although the USA figures are calculated in different ways, average credit card and car loan debt is US$18,700 per household, and mortgage debt is US$74,000.
In both countries, but especially the UK, the increase in consumer debt is based on the expectation of rising house prices, full employment and low interest rates. If any of these conditions change, then the results will be serious if not catastrophic.
The growth of the UK economy over the last 20 years, has been driven by the steady increase in house prices and underpinned by North Sea oil. During this time, the manufacture of goods in the UK has continued its secular decline as has the number of British owned firms in both the manufacturing and service sectors. The major growth sector of the economy has been financial services and the City of London, which has eclipsed Wall Street.
In both countries, the dampening of inflationary pressures due to cheap imports, is unlikely to continue indefinitely. The process of globalization is almost complete. Wages and material costs are set to rise in China and other far east manufacturers, and this imported inflation will bring to an end the period of consumer led growth in both the USA and UK. This will inevitably lead to period of re-adjustment, during which time interest rates could well rise to double digits.
In the meantime, the uncertainty surrounding financial institutions will continue to unnerve both the housing and stock markets of the western economies. Investors seeking serious returns need to look further afield, and borrowers need to reconsider their ability to repay loans in the event of a significant rise in interest rates.
In the US, lenders such as New Century Financial Corporation, the second largest sub prime lender in California, have gone bankrupt. In the UK, as Northern Rock is classed as a bank, the authorities intervened in order to prevent market panic. There have been persistent rumors that several leading UK banks, including Barclay have liquidity issues and the Bank of England wished to send a clear signal that no major bank will be allowed to fail.
The irony of Northern Rock is that it was generally deemed to be a successful company. The share price was GBP12.58 in February, but by 14 September 2007 it had dropped to GBP4.33.
Northern Rock achieved sales growth by offering 100% mortgages on home valuations, plus an extras 25%. Their projected growth rate was 20% per annum and yet the market was only growing at around 10%. In order to gain this volume of business, they needed very attractive mortgage products and also to adopt a flexible approach to consumers with mixed credit records.
They were so successful that they gained 22% market share of all new mortgages taken out during the first 6 months of 2007. The growth in the issue of mortgages was primarily funded via the wholesale market, as opposed to deposits by individual savers. It is estimated that some 75% of funds come from this source. The near collapse of interbank lending in August effectively starved Northern Rock of funds and caused a liquidity crisis.
In comparison to the US subprime scene, Northern Rock appears almost prudent. New Century of California took such a lenient view on customers' poor credit ratings that it allegedly would make advances to a person who came out of bankruptcy on the previous day. Northern Rock, on the other hand, has not been accused of failures of diligence in its lending policies and mortgage risk assessment methods. Northern Rock has not been hit by mortgage defaults, but by a lack of finance which is required to fund its ambitious expansion.
The housing market in the UK is now set to follow the downward trend of the USA. Prices have dropped by more than 10% in some locations such as Stockton, California, where the repossession rate is running at 3.7% of households.
Despite the differences between Northern Rock and the bankrupt US mortgage lenders, the root cause remains the same. This is the persistent growth of consumer debt.
In the UK, the average level of household debt, excluding mortgages, is GBP8, 856. Average household debt is GBP56,000 if mortgages are included. It should be noted that these are average figures and they include a large number of households who do not have mortgages or credit card balances.
Some 11.8m UK households have mortgages and the average amount outstanding is GBP96,560. In addition, if non mortgage debt is limited to the households with unsecured loans, mainly credit cards, then the debt figure rises to GBP20,600. Therefore the average total debt of households with mortgages and credit card loans is a staggering GBP117,160.
Although the USA figures are calculated in different ways, average credit card and car loan debt is US$18,700 per household, and mortgage debt is US$74,000.
In both countries, but especially the UK, the increase in consumer debt is based on the expectation of rising house prices, full employment and low interest rates. If any of these conditions change, then the results will be serious if not catastrophic.
The growth of the UK economy over the last 20 years, has been driven by the steady increase in house prices and underpinned by North Sea oil. During this time, the manufacture of goods in the UK has continued its secular decline as has the number of British owned firms in both the manufacturing and service sectors. The major growth sector of the economy has been financial services and the City of London, which has eclipsed Wall Street.
In both countries, the dampening of inflationary pressures due to cheap imports, is unlikely to continue indefinitely. The process of globalization is almost complete. Wages and material costs are set to rise in China and other far east manufacturers, and this imported inflation will bring to an end the period of consumer led growth in both the USA and UK. This will inevitably lead to period of re-adjustment, during which time interest rates could well rise to double digits.
In the meantime, the uncertainty surrounding financial institutions will continue to unnerve both the housing and stock markets of the western economies. Investors seeking serious returns need to look further afield, and borrowers need to reconsider their ability to repay loans in the event of a significant rise in interest rates.
A Mortgage for Your Increase
Secured Loans UK is a major problem in today's society. People get roped into a credit card when the credit card companies advertise all of the good things they have to offer including free interest etc. One of the long-time selling points for credit card Companies has been the fact that they are easily monitored, meaning it is much easier to see what you have spent and where you have spent your money with the card. Any time a person can legally spend more money than they actually have, a problem is bound to occur!
Secured Loans UK are received worldwide and are normally tied in with various reward systems such as points for travel, dining etc. All of these perks including the fact that they are extremely convenient make using them extremely simple, which can lead some people to debt, as they become unmanageable. Secured Loans UK differs from other payment methods in their monthly billing cycles. They are incredibly useful to those who are smart with their spending, as they can make various, instant payments, and pay it off each billing cycle. However, with the ease of using the credit card, it can be easy to charge more than you can pay in one lump sum if you are not careful with your finances! Some people depend on there Secured Loans UK when taking off work for medical reasons etc. If you cannot pay the payment in one lump sum whenever your billing cycle is up, then it will accumulate interest and this is what "kills" most people.
The interest on credit cards is much higher than that of most other credit institutions. Some credit card interest rates can be as high as 20 to 30%. This is how credit card debt starts and this is how the Companies make their money!
Have multiple credit cards is another cause of debt. With Secured Loans UK it makes managing your finances every month confusing, when one card should be making it less confusing. Making sure all of the cards are accounted for along with other monthly bills can be extremely time consuming and almost impossible to keep track of.
Secured Loans UK are received worldwide and are normally tied in with various reward systems such as points for travel, dining etc. All of these perks including the fact that they are extremely convenient make using them extremely simple, which can lead some people to debt, as they become unmanageable. Secured Loans UK differs from other payment methods in their monthly billing cycles. They are incredibly useful to those who are smart with their spending, as they can make various, instant payments, and pay it off each billing cycle. However, with the ease of using the credit card, it can be easy to charge more than you can pay in one lump sum if you are not careful with your finances! Some people depend on there Secured Loans UK when taking off work for medical reasons etc. If you cannot pay the payment in one lump sum whenever your billing cycle is up, then it will accumulate interest and this is what "kills" most people.
The interest on credit cards is much higher than that of most other credit institutions. Some credit card interest rates can be as high as 20 to 30%. This is how credit card debt starts and this is how the Companies make their money!
Have multiple credit cards is another cause of debt. With Secured Loans UK it makes managing your finances every month confusing, when one card should be making it less confusing. Making sure all of the cards are accounted for along with other monthly bills can be extremely time consuming and almost impossible to keep track of.
Switching credit cards & loans - what makes you change provider?
The latest moneyfacts.co.uk user polls have revealed that 38% of us have changed credit card provider due to bad customer service. On top of this, 36% of us have avoided a particular provider because of a friend's bad experience.
As far as personal loans are concerned, 18% of us have changed provider due to bad customer service and 40% of us have avoided a particular provider.
These figures show that customer service is still something that is important to all of us. If we have a query or problem with our personal finances we expect to be treated fairly and to get the help and information we need.
Word of mouth is also a huge influence when deciding with whom to take out a loan or credit card with. If we have had a bad experience with something we tell everyone. Unfortunately for these providers, it is rare for us to tell friends how helpful or good a particular service is.
Less of us move our personal loan due to bad service than we do our credit card. The main reason for this is that there are often penalties for repaying personal loans early. This can equate to hundreds of pounds. So, however fed up you are with customer service make sure you check what penalties are involved for leaving your lender.
Whether you avoid a provider due to having heard bad reviews is your own choice. With personal loans and credit cards there is so much variation in rates offered that it is wise to shop around to make sure you are getting a good deal. The examples below show that rate is an important factor when deciding where to borrow money.
Loan rates can vary from 5.5% to over 20%. On a loan of Pound10,000 over five years this makes a difference of over Pound50 on monthly repayments - over Pound3,000 over the term. This shows that you should not take out the first personal loan you see. However, the rate you are given can depend on your credit rating. This is a scoring system that lenders use to show how creditworthy people are. Thus, you may not always qualify for the headline rate, so make sure you know what rate you are being offered before taking out your personal loan.
Interest rates on credit cards can reach over 20%. If you had a balance of Pound1,000 on your credit card at a rate of 20%, paying off the minimum monthly payment amount, you could save over Pound100 in a year by moving this balance to a credit card with a 0% balance transfer deal.
As far as personal loans are concerned, 18% of us have changed provider due to bad customer service and 40% of us have avoided a particular provider.
These figures show that customer service is still something that is important to all of us. If we have a query or problem with our personal finances we expect to be treated fairly and to get the help and information we need.
Word of mouth is also a huge influence when deciding with whom to take out a loan or credit card with. If we have had a bad experience with something we tell everyone. Unfortunately for these providers, it is rare for us to tell friends how helpful or good a particular service is.
Less of us move our personal loan due to bad service than we do our credit card. The main reason for this is that there are often penalties for repaying personal loans early. This can equate to hundreds of pounds. So, however fed up you are with customer service make sure you check what penalties are involved for leaving your lender.
Whether you avoid a provider due to having heard bad reviews is your own choice. With personal loans and credit cards there is so much variation in rates offered that it is wise to shop around to make sure you are getting a good deal. The examples below show that rate is an important factor when deciding where to borrow money.
Loan rates can vary from 5.5% to over 20%. On a loan of Pound10,000 over five years this makes a difference of over Pound50 on monthly repayments - over Pound3,000 over the term. This shows that you should not take out the first personal loan you see. However, the rate you are given can depend on your credit rating. This is a scoring system that lenders use to show how creditworthy people are. Thus, you may not always qualify for the headline rate, so make sure you know what rate you are being offered before taking out your personal loan.
Interest rates on credit cards can reach over 20%. If you had a balance of Pound1,000 on your credit card at a rate of 20%, paying off the minimum monthly payment amount, you could save over Pound100 in a year by moving this balance to a credit card with a 0% balance transfer deal.
UK Loans are Great to Have
Loans can be a good decision for many people. However, when people look at their financial portfolio many do not consider loans as a wise option. This is because people see the principal plus the interest and automatically assume that a loan is a bad decision.
But that's not always the case. When considered as part of your overall financial picture, you may be surprised to learn that a UK personal loan could be a wise option for your financial portfolio. In fact, many people are beginning to look to UK personal loans as another financial tool in their financial toolbox.
A UK personal loan is available for many people who want to consolidate their bills, help them budget, and leverage their investments.
A UK personal loan can help someone consolidate their bills by providing them with one bill to replace the many credit card and utility bills that they may have accumulated over time. Often, by consolidating several bills together, you may be able to negotiate a better interest rate with the lending institution simply by having a larger amount of money on loan. In fact, when you compare interest rates from lending institutions and credit cards, you'll probably discovered that consolidating many of your bills automatically reduces the overall interest you'll pay on average.
A UK personal loan can also help people buy get. This is because we are inundated with bills throughout the month as they come to us in the mail. Unfortunately, we are not always able to paint in the very day they arrived in our post box. Instead, it you came personal loan can pull all those bills together so that we have one bill in the month and we know how much it is going to be. This will help us as we budget our finances.
Finally, a UK personal loan can help someone leverage their investments by providing them with initial capital to make improvements on their home. Often, these improvements increase the value of your home much more than the actual value of the loan plus interest.
If you shop around, you'll find a loan that gives you the amount of money you need to borrow as well as a variety of choices for the period of time you'd like to repay it. At first glance, a loan may seem like an odd choice to add to your portfolio, but consider the advantages you get from consolidating your bills, helping you with your budget, and leveraging your investments and you will see that eight UK personal loan may be a good choice for your financial portfolio.
But that's not always the case. When considered as part of your overall financial picture, you may be surprised to learn that a UK personal loan could be a wise option for your financial portfolio. In fact, many people are beginning to look to UK personal loans as another financial tool in their financial toolbox.
A UK personal loan is available for many people who want to consolidate their bills, help them budget, and leverage their investments.
A UK personal loan can help someone consolidate their bills by providing them with one bill to replace the many credit card and utility bills that they may have accumulated over time. Often, by consolidating several bills together, you may be able to negotiate a better interest rate with the lending institution simply by having a larger amount of money on loan. In fact, when you compare interest rates from lending institutions and credit cards, you'll probably discovered that consolidating many of your bills automatically reduces the overall interest you'll pay on average.
A UK personal loan can also help people buy get. This is because we are inundated with bills throughout the month as they come to us in the mail. Unfortunately, we are not always able to paint in the very day they arrived in our post box. Instead, it you came personal loan can pull all those bills together so that we have one bill in the month and we know how much it is going to be. This will help us as we budget our finances.
Finally, a UK personal loan can help someone leverage their investments by providing them with initial capital to make improvements on their home. Often, these improvements increase the value of your home much more than the actual value of the loan plus interest.
If you shop around, you'll find a loan that gives you the amount of money you need to borrow as well as a variety of choices for the period of time you'd like to repay it. At first glance, a loan may seem like an odd choice to add to your portfolio, but consider the advantages you get from consolidating your bills, helping you with your budget, and leveraging your investments and you will see that eight UK personal loan may be a good choice for your financial portfolio.
Mortgage Debt - Avoid Using Your Credit Card
A survey for the homeless charity Shelter has revealed that in 2007, more than one million people in the UK have used a credit card to pay their mortgage.
It seems that young people, including first time buyers are so eager to remain on the property ladder that they have resorted to this drastic action. More that 7.5% of people aged 18-24 have admitted paying their mortgage with their credit card.
But if you think that's bad, it gets even worse.
It has been reported that some mortgage lenders are actually advising their customers who have repayment problems to take this course of action.
Truly Shocking!
The interest rate on most credit cards is at least 50% higher than even the worst mortgage rates available in the sub-prime sector. And the repayment schedule for your credit card debt will be spread over a much shorter period of time.
So in effect you're swapping long-term, low-cost debt for short-term, high-cost debt.
Even if you use a credit card that provides 0% interest on purchases, the debt will still have to be repaid at some point in the future.
Okay, it might buy you a little time when you don't have to pay interest, but when the interest free period comes to an end, you'll have to find another 0% deal, which might be almost impossible in the current economic climate. Credit card providers are clamping down on easy credit, special 0% interest rate deals are scarce and many lenders have implemented balance transfer fees.
And if you miss your credit card payment date just once, any special deals may be canceled and you'll have to start paying a hefty rate of interest, in addition to your continuing mortgage repayments.
So wherever you live, if you're having problems making your monthly mortgage payments, don't follow such reckless and irresponsible advice. Once you cross this dangerous financial barrier, the countdown to repossession starts ticking.
If you find yourself struggling to repay your mortgage, there are several options worth exploring.
The first step it to talk to your lender and see if they can suggest any sensible solutions to help you overcome the problem. Don't let these reports about irresponsible lenders put you off contacting your mortgage provider. They may be able to offer you a solution that doesn't involve making your situation worse.
If your financial problems are only likely to be temporary, you may be able to arrange a payment holiday so that you don't have to make mortgage repayments for two or three months.
However, in many cases, this option will only be available if you've previously made over payments It also mean that the overall size of your mortgage debt will rise slightly.
Alternatively, you could shift the monthly payment date so that your mortgage payment is deducted from your bank account just after your salary has been paid in.
On the other hand, if your repayment problems are likely to exist for the foreseeable future, it's important to consider other ways to reduce the size of your monthly repayments.
You could extend the term of your mortgage, repaying it over 27 or 28 years instead of 25, or you could switch from a repayment mortgage to an interest only mortgage until your financial problems pass.
However, both of these are major financial decisions that should only be taken after appropriate financial advice from a professionally qualified advisor.
As a last resort you could consider stepping off the property ladder temporarily. At the time of writing, the property markets in many countries are generally thought to be overvalued and this would allow you to find a more affordable home once the property markets return to sensible levels.
Whatever happens, don't default on any of your mortgage repayments as it will dent your credit rating and could lead to an increase in the rate of interest that you have to pay on your debts.
Just make sure that you find a safer solution than whipping out your credit card!
It seems that young people, including first time buyers are so eager to remain on the property ladder that they have resorted to this drastic action. More that 7.5% of people aged 18-24 have admitted paying their mortgage with their credit card.
But if you think that's bad, it gets even worse.
It has been reported that some mortgage lenders are actually advising their customers who have repayment problems to take this course of action.
Truly Shocking!
The interest rate on most credit cards is at least 50% higher than even the worst mortgage rates available in the sub-prime sector. And the repayment schedule for your credit card debt will be spread over a much shorter period of time.
So in effect you're swapping long-term, low-cost debt for short-term, high-cost debt.
Even if you use a credit card that provides 0% interest on purchases, the debt will still have to be repaid at some point in the future.
Okay, it might buy you a little time when you don't have to pay interest, but when the interest free period comes to an end, you'll have to find another 0% deal, which might be almost impossible in the current economic climate. Credit card providers are clamping down on easy credit, special 0% interest rate deals are scarce and many lenders have implemented balance transfer fees.
And if you miss your credit card payment date just once, any special deals may be canceled and you'll have to start paying a hefty rate of interest, in addition to your continuing mortgage repayments.
So wherever you live, if you're having problems making your monthly mortgage payments, don't follow such reckless and irresponsible advice. Once you cross this dangerous financial barrier, the countdown to repossession starts ticking.
If you find yourself struggling to repay your mortgage, there are several options worth exploring.
The first step it to talk to your lender and see if they can suggest any sensible solutions to help you overcome the problem. Don't let these reports about irresponsible lenders put you off contacting your mortgage provider. They may be able to offer you a solution that doesn't involve making your situation worse.
If your financial problems are only likely to be temporary, you may be able to arrange a payment holiday so that you don't have to make mortgage repayments for two or three months.
However, in many cases, this option will only be available if you've previously made over payments It also mean that the overall size of your mortgage debt will rise slightly.
Alternatively, you could shift the monthly payment date so that your mortgage payment is deducted from your bank account just after your salary has been paid in.
On the other hand, if your repayment problems are likely to exist for the foreseeable future, it's important to consider other ways to reduce the size of your monthly repayments.
You could extend the term of your mortgage, repaying it over 27 or 28 years instead of 25, or you could switch from a repayment mortgage to an interest only mortgage until your financial problems pass.
However, both of these are major financial decisions that should only be taken after appropriate financial advice from a professionally qualified advisor.
As a last resort you could consider stepping off the property ladder temporarily. At the time of writing, the property markets in many countries are generally thought to be overvalued and this would allow you to find a more affordable home once the property markets return to sensible levels.
Whatever happens, don't default on any of your mortgage repayments as it will dent your credit rating and could lead to an increase in the rate of interest that you have to pay on your debts.
Just make sure that you find a safer solution than whipping out your credit card!
Cashing In On Your Credit Card For Christmas?
Tis the season to be jolly - and Christmas usually means spending more than you'd like to. If you're finding your cash is spending even less time in your wallet than usual, it can be hard to resist the urge to turn to the credit card at Christmas for a little light relief.
Using your credit card to take out cash is tempting but can also be horrendously expensive.
If you think you'll need more cash than usual at this time of year, don't be surprised if you're hit for six by the high costs. MoneyExpert.com reveals how to keep costs to a minimum and still enjoy the festive period.
So what makes withdrawing cash expensive?
Credit card providers rarely let you borrow money for free. Your current debt and purchases may be covered by a zero per cent deal, but that won't last forever and one day you'll be charged for borrowing money on your credit card.
The difference is that you don't get the same leeway with credit card cash withdrawals. If you want to borrow cash on your credit card you'll have to pay - and in most cases, you'll pay dearly.
All this means that even if you've researched the market and saved money with a great deal, you could scupper your savings with just one hefty cash withdrawal.
How much does it cost?
The truth is that if you pay off your balance each month, withdrawing cash from an ATM with your credit card in the UK won't cost you anything. However almost all credit cards charge very high interest rates on cash advances - and the interest is charged immediately.
So if you don't pay off your balance you'll have to fork out for the interest from the point you withdraw the money. On average you'll be charged a hefty 21.1% APR, but you could pay as much as 37%. In other words, take out Pound100 in cash with your credit card and you could have to pay your provider Pound137 back.
Holiday watch
The situation is even worse if you take cash out with your credit card abroad. Brits on their holidays made nearly Pound6 billion worth of overseas cash withdrawals last year - but we estimate that it will have cost around Pound250 million for the privilege.
Most providers will offer you a poor exchange rate for starters, but will also charge the same high rate of interest and in many cases an admin fee for handling the transaction as well. It all adds up to a bad deal, so avoid ATMs abroad with your credit card if you can.
What's the solution?
Cash withdrawals have always been the most expensive element of a credit card - there's no escaping the cost. But if you think you might have to withdraw cash on your credit card, there are a few providers who charge below ten per cent for an advance.
The bottom line is that there's never a cheap time to withdraw cash with your plastic. There may be a good time - particularly in emergencies - but in those circumstances the cost of the process is usually not a consideration.
With so many ways to pay for products and services these days, the cost of cash shouldn't be the major reason for your choice of credit card. A 0% Purchase Rate Credit Card for example would allow you to get that must have gift and put off paying it back for months . So, If you insist on splashing out on your credit card this Christmas, make sure you do it at the till and not at an ATM.
Using your credit card to take out cash is tempting but can also be horrendously expensive.
If you think you'll need more cash than usual at this time of year, don't be surprised if you're hit for six by the high costs. MoneyExpert.com reveals how to keep costs to a minimum and still enjoy the festive period.
So what makes withdrawing cash expensive?
Credit card providers rarely let you borrow money for free. Your current debt and purchases may be covered by a zero per cent deal, but that won't last forever and one day you'll be charged for borrowing money on your credit card.
The difference is that you don't get the same leeway with credit card cash withdrawals. If you want to borrow cash on your credit card you'll have to pay - and in most cases, you'll pay dearly.
All this means that even if you've researched the market and saved money with a great deal, you could scupper your savings with just one hefty cash withdrawal.
How much does it cost?
The truth is that if you pay off your balance each month, withdrawing cash from an ATM with your credit card in the UK won't cost you anything. However almost all credit cards charge very high interest rates on cash advances - and the interest is charged immediately.
So if you don't pay off your balance you'll have to fork out for the interest from the point you withdraw the money. On average you'll be charged a hefty 21.1% APR, but you could pay as much as 37%. In other words, take out Pound100 in cash with your credit card and you could have to pay your provider Pound137 back.
Holiday watch
The situation is even worse if you take cash out with your credit card abroad. Brits on their holidays made nearly Pound6 billion worth of overseas cash withdrawals last year - but we estimate that it will have cost around Pound250 million for the privilege.
Most providers will offer you a poor exchange rate for starters, but will also charge the same high rate of interest and in many cases an admin fee for handling the transaction as well. It all adds up to a bad deal, so avoid ATMs abroad with your credit card if you can.
What's the solution?
Cash withdrawals have always been the most expensive element of a credit card - there's no escaping the cost. But if you think you might have to withdraw cash on your credit card, there are a few providers who charge below ten per cent for an advance.
The bottom line is that there's never a cheap time to withdraw cash with your plastic. There may be a good time - particularly in emergencies - but in those circumstances the cost of the process is usually not a consideration.
With so many ways to pay for products and services these days, the cost of cash shouldn't be the major reason for your choice of credit card. A 0% Purchase Rate Credit Card for example would allow you to get that must have gift and put off paying it back for months . So, If you insist on splashing out on your credit card this Christmas, make sure you do it at the till and not at an ATM.
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