Friday, May 11, 2007
Category:
Consolidation
As a result of the Competition Commission’s enquiry in March 2006, the store card market is set to change.
From 1st May 2007 all providers will have to print warnings on statements if they charge consumers annual percentage rates (APRs) of 25% or above.
An honesty box which will summarize interest payments and penalty charges, and carry warnings about the dangers of making only the minimum monthly repayment summary will have to also be included.
Nick White, Director of Financial Services at independent price comparison and switching service uSwitch.com, comments:
“Whilst the new rules for store cards that will come into effect tomorrow are a small step in the right direction in terms of improving transparency, it appears the Competition Commission is closing the stable door after the horse has bolted. We believe that consumers need to be made aware of high APR’s on store cards (up to 30.9% APR) at the time of signing up to these deals so they know exactly what they’re getting. There is also a big issue around the fact that retail staff selling these cards are not trained in financial services and, in many cases, do not fully understand the interest payments or the basic terms and conditions of the credit cards they are selling. This training should be mandatory yet it is still not happening.
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Homeowners who are finding that they are paying multiple credit and store card bills where a large part of the monthly repayment is interest could benefit from taking out a debt
consolidation loan. One of the many options available, a debt consolidation loan could put all debt into one place, making it easier to keep track of the amount and exact date payment every month. Made payable over a term to suit the borrower from 5 to 25 years, a debt consolidation loan could help homeowners plan their finances as they’ll know what needs to be paid and when. It is however important to remember that with a debt consolidation loan, repaying borrowing over a longer term will increase overall interest charges.
