Learn About Finance and Credit

Author: CTCC

Do You Need a Premium Credit Card?

No longer confined to the hands of affluent city businessmen and wealthy heiresses, premium credit cards have become all the rage in recent years. Undoubtedly, the associated ‘snob-factor’ has proved hard to resist for many. But are there any real advantages in having a premium credit card and, more importantly, should you invest in one? Here’s a rough guide to the world of premium credit cards.

Most people are put off premium credit cards because they believe that they would be unable to afford the costs involved. However, surveys suggest that these credit cards generally come with lower APRs.

For the most part, premium credit card holders must deal with interest rates of around 14% or 15% compared to the standard 18-19% faced by other card-holders. As such, low interest rates make these cards an excellent option for just about anyone who wants to save on interest payments.

Low interest rates on premium credit cards might come as a surprise, but providers have had little choice given the current state of the premium credit card market in the United Kingdom. With few takers beyond the rich and famous, financial institutions are now seeking to attract less affluent Britons. It is therefore hardly surprising that most providers of premium credit cards require that you have an annual income of a mere £13,000 per annum.

There are further benefits to be gained as well. However, in general, these are only available to those card-holders who pay off their balance in full each month. For example, it’s perfectly possible to get a credit limit of a few thousand pounds if you pay off your entire balance at the end of each month. If you fail to do so, however, your credit limit is likely to be significantly lower. Other advantages include free travel insurance and cash back offers.

Critics, however, argue that you shouldn’t let such benefits sway you to switch to a premium credit card. After all, you’ll only receive additional benefits if you continually pay for purchases using your premium credit card. According to Kathy Foley of The Times, “Real perks only come with the credit cards aimed at those individuals who don’t need credit cards.”

The most exclusive of premium credit cards are available only to a lucky few. These include the American Express ‘Black Centurion’ credit card which is on offer only to a few select clients chosen by the company. Another example is the Signia Mastercard issued by the Queen’s bankers, Coutts and Co. If you’re lucky enough to possess either of these cards you can enjoy perks from worldwide concierge services to the use of luxury airport lounges.

So think carefully before switching to a premium credit card. Whilst there are benefits to be reaped, much depends on your current financial situation and the extent to which you value perks and freebies.

Consumers confident on credit despite record debts

Adult consumers in the UK possess an average unsecured debt of £8,800 and have collectively run up a credit card debt of almost £5.5 billion, according to new figures from financial charity CreditAction.

The charity, which aims to educate consumers on the dangers of credit, reports that three quarters of all credit cardholders regularly fail to clear their account and subsequently face interest rates of as much as 20 per cent.

The immense level of debt is caused in large part by the many different providers that offer customers the choice of hundreds of different credit card deals, but consumers are also responsible for spending beyond their immediate means.

British consumers have the largest personal debt of any country in Europe, collectively owing an immense £1.3 trillion. Official data suggests that over 30,000 individuals claimed insolvency in the first quarter of 2019 and it is expected by some market analysts that as many as 130,000 individuals will be forced to do the same by the year’s end.

Consumers remain confident

Despite the record levels of debt, Julia Dallimore, marketing director at loan provider Picture Financial, believes that most consumers are happy with their credit and borrowing situation.

Commenting during Credit Awareness Week (May 14th-20th), which aimed to promote greater understanding of credit issues among the general public, Ms Dallimore said: “Contrary to many of the reports out there the vast majority of us are comfortable with our levels of credit and borrowing and use it as an acceptable means to maintain our standard of living”.

She also asserted that the key to avoiding financial hardship is to understand the terms of any financial agreements, but warned that it was becoming “increasingly apparent” that people are having difficulties with this.

“To ensure people are better informed about their finances, it is vital that consumers are completely clear about what they are trying to achieve when taking on extra borrowing, whether it is to pay off their existing credit in a shorter timeframe or reducing their monthly repayments for greater financial freedom.”

A recent survey conducted by CreditExpert.co.uk, the online credit monitoring service from Experian and sponsor of Credit Awareness Week, found that six million British consumers would only be concerned by their debts if they exceeded £15,000.

Remarkably, 1.4 million people, five per cent of the adult population, claimed that they would not worry about debts until they passed £50,000.

The report also found that consumer confidence reached an annual high during April. In fact, 41 per cent of people with credit or loans claimed they were “very comfortable” with their current financial situation.

Jim Hodgkins, managing director of CreditExpert.co.uk, noted: “The fact that so many Brits are happy with unsecured borrowing of at least £15,000 may seem shocking on first sight, but the ‘credit comfy’ generation seems to have become anaesthetized to the real implications of mounting debt.

“With the current rise in interest rates, many will find that debt they blithely ignored is in danger of spiralling out of control,” he warned consumers.

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