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Fergus will be back on the John Beattie Show on BBC Radio Scotland on Wednesday just after the 1pm news with some great tips to help organise your money and understand your consumer rights. This week he'll be looking at the best way to spring clean your finances at the beginning of a new tax year. Catch up on previous shows here

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The Great Credit Card Rip-Off

The Financial Conduct Authority is bringing in new rules later this year to force credit card companies to intervene and help customers with  long-standing debt.

Every day I get asked questions about clearing credit card debt by people who seem to be in a never ending debt spiral. Payments each month only ever seem to cover interest, with capital balances hardly reducing at all. In some cases they actually increase where monthly payments are not even enough to cover the interest that is due.

It’s a hugely depressing situation to be in, and it’s almost criminal that it has been allowed to happen for so long. The Bank of England Base Rate is at an almost all time low and there are still millions of people paying interest rates as high as 30% APR on their credit cards and store cards.

Credit card companies have no interest in encouraging customers to repay their debt quickly. If we did then they would earn millions of pounds less in interest charges.

Here’s why.

Assume you owe £3000 on your credit card with an interest rate of 19% and only make the minimum payment of £70 per month. It could take you more then twenty-five years to pay off the loan. Thats’s longer than the time it takes most people to pay off their mortgage.

The minimum monthly payment reduces as the outstanding balance reduces which is why it takes so long to repay. Assume you start with a payment of £70 per month and maintain that payment regardless of the minimum. You could clear the balance in just over five years, at around one-third of the total interest.

It’s important that credit card companies intervene to help their most distressed customers. It’s also important that they are forced to look at the way they charge interest on their credit cards. And the way they communicate the effects of these different repayment rates on the total interest payable.

And it’s vital that there is a limit applied to the interest rate that they are allowed to charge.



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It looks as if the Financial conduct Authority might be about to take action to help so-called 'mortgage prisoners', borrowers who have loans with companies that are no longer trading.
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