Filed under: Credit Cards
While we’re all hoping Santa Claus will break into our house and leave us a bounty of presents, there are plenty of other yuletide security-breaches that won’t leave such a warm glow. And despite credit cards getting savvier than ever, they will never be impenetrable. In fact, Wired has shown just how easy it is to fake a credit card, which will prove harrowing season at a time when people will need to rely on plastic far more than usual. CPP predict that 315,000 shoppers are likely to experience card fraud this winter, with the average sum lost hovering around the £600 mark.
Richard Hurley, communications manager of the UK’s Credit Industry Fraud Avoidance System, offers a timely warning: “the festive season traditionally reminds us of the high street threats of thieves and pickpockets stealing our wallets. We must, however, protect ourselves equally from their latter-day counterparts who target our identities.” CIFAS noted at the start of December that 68,000 people suffered from online identity theft in the first ten months 2009 – a 37% increase from the year before!
But just as serious a problem as actual fraud is the perception of fraud; if consumers have no faith in online security, they won’t be willing to take advantage of the many great online offers and settle for more expensive, but seemingly safer, real world purchases. A survey from Verisign claims 22% of British consumers are “held back” from shopping online this Christmas due to fears of having their identity stolen and 14% automatically distrust ecommerce sites on principle.
While is is always more comforting to have rely on picking up tangible goods from a trusted brick-and-mortar store, it isn’t as though real-world credit card purchases are truly much safer. Last month, the BBC reported on the largest credit card recall in history. In Germany, over 100,000 German credit cards were replaced due to the threat of personal data theft. The breach supposedly took place by a Spanish company, potentially posing a threat to any visitors to the country over the last few months.
What is important, no matter where you shop, is to spot the tell-tale signs that suggest your credit card is in safe hands. At present, there are numerous safeguards shoppers can look out for ensure they are as protected as possible. Most importantly, make sure the URL in the address bar either begins with https:// or has a padlock sign, to see that any data you enter will be encrypted. To check the security of the encryption, it is worth checking to see if the the payment service has been verified with an ISIS (Internet Shopping is Safe) or Shopsafe logo.
Jack Dorsey’s ‘Square’, a portable phone-based card-reader, stores no transaction data, making it far safer than any contemporary practice – so perhaps we are headed to a more secure future. But as they won’t be ready for Christmas, caution and common-sense are two of the best friends you can have over the holiday season.
This is a Guest Post from the team at Financial Facts, a great UK personal finance blog. If you’d like to write a guest post for MoneyStand, get in touch!
December 21, 2009
Credit cards are a tricky subject. I don’t want to encourage anyone to spend dangerously on their credit cards or to spend above their means, but I also think it’s good to discuss how to use a credit card in a smart way to actually help control your finances.
First of all avoid the worst way to use your credit card – long term borrowing. If you need a loan it will almost always be cheaper to get it from a bank, especially if you are a home owner. Another method you could consider is your overdraft facility. A friend of mine has a particularly good deal with his bank that works out for him cheaper than a credit card for those small purchases. He finds the charges smaller for his spending needs.
But, assuming you won’t borrow any money for longer than a month or so, there are a lot of benefits to having a credit card. Indeed some goods and services, such as hire cars, are very hard to get without one.
This is because of the extra insurance and guarantees that your card provider gives you. Using your credit card for an expensive purchase can be worth it – I know someone who got £100 back after he broke a new camera. Even though he admitted he was at fault he was still partially covered. It is worth finding out what you are entitled to from your card.
Many credit cards also offer cashback or bonus schemes. So long as you use them for spending you would be doing anyway this can be a great saving – sometimes as much as 3% or 4%!
Basically credit cards can be great products if used right. Credit cards should never be used for credit! Use credit cards the smart way.
November 19, 2009
Here’s an interesting thought that a friend of mine got into my head over the weekend: Can you use a credit card to actually make some money?
From my experience, by owning a credit card you are probably going to spend more money then you would have usually spent, just because it is all too easy to buy something on your card and not worry about the price. You don’t physically hand the money over, and you think that you will have ages to pay if off, so you don’t really care so much.
However, a friend of mine recently told me about a credit card they have which is a 0% interest on purchases one. This means that she can buy things on the card, and then doesn’t have to pay the bill until the end of the month – at no extra interest. Her reasoning on ‘making money’ this way is that she can put the money that she would have spent into a savings account – earning interest on money that would have been spent. According to her, you can easily earn a few hundred pounds a year simply by using credit cards this way.
Another way of using a credit card that could be considered is by applying for a cashback credit card – then you simply get paid to spend on your card. So if you spend £1000 on your card say, you might earn 5% cashback – which is about £50. This cashback is money that you wouldn’t have earned if you paid by cash, so it’s a bonus really. However, as the age old saying goes “there’s no such thing as a free lunch” so always investigate your options throughly when looking for a new credit card, and only spend what you can pay off within a reasonable time frame.
October 21, 2009
So you have a household budget that you stick to but you’re still worried about falling into debt? Well that is understandable, all it takes is for the boiler to pack in, or unforeseen circumstances to pop up causing necessary expenditure of cash you don’t have.
The first way to buffer against this is to save regularly and have a savings pot for when things go wrong. At least part of the saving should be instant access for when money is needed urgently, as I found out when my cooker died! Being debt free doesn’t have to mean no credit cards.
Many credit card offer a percentage cash back for using them and as long as the balance is paid off in full every money this will save you money rather than charging you interest.
Don’t forget those insurances you pay every month either, if you drop the iron on the carpet (as i did in december) then you can probably claim it off the house insurance if you have accidental cover.
March 23, 2008
Debt. We live in a world where it is easy to fall in to debt problems. Some debts are unavoidable & I think that it is important to manage the debt you have so that it does not cost you more that it absolutely has to. Its also important to have a goal of being debt free & not borrowing unless it is 100% necessary.
Mortgage
Our mortgage is the biggest loan any of us will be personally asking the nice bank manager for. I think that 100% mortgages are a bad idea as they give you 0% equity in your property for the first several years. Also, if there is any down turn in the market you could find yourself in a negative equity situation. This means that if you sell your house, the amount realized from the sale would not cover the amount you owe. No one wants to have to pay for a house that they no longer live in. Many people pay a little extra off their mortgage every month. This is a great idea as it reduces both the amount of the original debt & the interest that you are charged. You are also reducing the term of your mortgage.
I think that it is important for people to take the time & look for the best mortgage deal that they can get. Its now easy enough to change your mortgage provider & can often make a considerable difference to your interest rate.
Credit Cards / Store Cards
Unless you can afford to fully repay the amount owed every month I think that cards are the easiest way to end up in debt. The interest rates are high & it is far too easy to charge items to the card either online or in shops, restaurants, bars etc.
If you find yourself with large card debts cancel your cards & transfer your balance to a new card. There are lots of 0% interest for the first x months offers. This will give you breathing space to reduce the debt without the interest charges.
Holiday / Car / Wedding Loans
The golden rule should be that if you cant afford to pay for it outright then you cant afford it.
Lenders are giving out loans far too easily. There is nothing wrong with saving for a few months in a high interest account & then buying your car or going on your holiday. Most people are surprised at how quickly it adds up & once you are in the habit of saving it become easier.
March 14, 2008
In today’s society debt is an issue for many people. Almost everyone knows someone who has been affected by debt. One major way to avoid getting into debt is to plan ahead, not just by creating a budget and sticking to it, but also by saving.
Saving money is a very similar principle to setting a budget. Firstly you need to look at how frequently you are paid. If you are paid monthly then you set yourself a monthly savings target, if weekly then a weekly savings target should be set. Generally you should aim to save at least 10% of what you bring home in your pay-packet after tax, national insurance etc. So if, for example you earn £1,200, then you should aim to put £120 of that into a savings account. However, if your on a really tight budget save as much as you can afford to, even 1% is better than nothing.
It is very important to keep your savings in a separate account to your normal everyday spending account, otherwise you risk unwittingly spending your savings. It is also extremely important that you make your savings work for you – you want to get as much benefit from your savings as possible, so a high interest account such as an ISA is advisable. Once you have put your savings into your chosen account forget about them, they are not extra money for you to use on frivolous things, they are there as a back up plan, to stop you getting into debt if a cash-crisis emerges such as the temporary loss of income or your roof collapses.
Dedicating the time to sorting out your finances and planning a savings-budget is one of the most important investments that you can make. Making a small commitment to save just 10% of your pay, an amount which many of us would not miss, could really make the difference between being financially secure and getting into debt.
March 7, 2008
1. Never let your expenditure exceed your income. Use a budget to work out how much you can afford to spend on the various costs of living and stick to it!
2. Write down everything you spend. It’s surprising how much money you can waste on non essentials and not even remember where it went.
3. Unless you are possessed of sufficient discipline to use a credit card sensibly, it’s better to stick to cash. If your weekly budget for shopping is £60, for example, then take £60 in cash with you and leave the debit and credit cards at home. That way you can’t over spend. This is also a useful tactic on nights when beer can impair financial judgement!
4. Be leary of credit. If you can’t afford it now, odds are you won’t be able to afford it later. If you must use credit, check the APR, repayment period and possible penalties for late or missed payments.
5. Don’t carry money or credit cards “just in case”. That way you won’t spend on autopilot.
6. Never buy new when second-hand will do. Besides being better for the environment, buying second-hand is better for the purse.
7. Be a saver! Save up for planned purchases and treats. Shop around for good interest rates on savings accounts and watch the pounds mount up. It doesn’t matter if it’s only a small amount saved each month. It will add up.
8. The supermarket is not your friend! Supermarkets market their goods with great care and skill to seduce you into thinking you’ve got a bargain. If you didn’t need it in the first place, then it’s not a bargain. Write a list and stick to it.
9. Buy only what you need. Particularly for smaller families, buying large amounts of goods because they work out cheaper can be counter productive. Many products have limited shelf life and will end up going off and being wasted before they are consumed.
10. Enjoy your cash! Being free of debt and the “feel good” factor of some savings frees you up to really enjoy what you’ve purchased, rather than worrying about the debt which it has entailed. Go out and enjoy the debt free world.
March 1, 2008
