No one can deny that 2011 was, in many respects, one the toughest ever years financially for people, businesses, and governments around the world. However, it also saw consumers benefit from some of the longest interest free balance transfer periods on credit cards ever seen, the new Consumer Credit Directive change the balance of payments hierarchy for everyone benefit. So given the mix of tasty fruit and banana skins 2011 offered we thought we’d look into our crystal ball to give our view as to what 2012 might hold for UK personal finance.

Double Dip Recession?
The main thing everyone wants to know is whether the UK will slip back into another recession and there are as many answers are there are experts on the subject. Our answer is, “possibly” – although don’t quote us on that! Yes, you want more information than that but it’s impossible to give a definite answer. Some analysts are predicting that whilst the Eurozone may end up in recession, the UK could come out of it relatively unscathed. Whereas others believe that the UK will be just as badly affected, as things will get worse before they get better, with the second dip being even tougher than the first in 2008.

Either way UK personal finances are more likely to be affected this year by Government cuts and public sector job losses. The private sector is not in a position to pick up the pieces and even if it were it would be questionable whether private sector wages would match Inflation, which rose to a record high towards the end of 2011. Although it is thought that this will decrease throughout 2012 it will continue to put pressure on households to tighten their belts and get more finance savvy.

Personal Debt
The total UK personal debt decreased by 0.02% to £1451bn from October 2010 to October 2011 and the average household debt decreasing by just less than 7% to £7,984 (excluding mortgages). The average consumer borrowing on credit cards and other forms of unsecured finance also decreased, down to £4,226 per average UK adult. Despite this slight decline in the amount owed by UK consumers, the Office for Budget Responsibility (OBR) still predicts that household debt will increase to £1823bn by end of 2015, and £2045bn by Q1 2017.

These statistics from Credit Action coupled with the fact that three in ten of us decided to go overboard and plunge into debt for Christmas and New Year, make it look likely that personal debt will deepen further into 2012. Research has shown that it takes most of us around six months to pay off Christmas debt, with 8% of us still struggling with it 12 months later. So, it looks like 2012 will be just as tough on our wallets as last year. Ouch!

The Housing Market
The figures published at the end of 2011 suggested that house prices were on the rise as did the gross mortgage lending reported by the Council of Mortgage Lenders (CML). The CML went on to say that it did not know what to expect for the remainder of 2012 as economic uncertainty was expected to widen. However, there is some good news for mortgage holders though as the Bank of England base rate is expected to remain at 0.5%.

Savings & Investments
If predictions are correct and the Bank of England base rate does stay at its record low for some time, savers could struggle to see the benefit. On the plus side inflation is expected to fall, which is good news as the value of your savings should at least stay intact. Due to the poor savings climate it is more important than ever that you take full advantage of your ISA allowance.

Finance Bill 2012
One of the most important things on the 2012 agenda for personal finance is the Finance Bill 2012. The draft legislation for consultation was released by the Government in December, and is expected to be published after the Spring 2012 Budget in March.

There are a number of changes on personal tax, corporate tax, and charities included in the Finance Bill 2012, a summary of the draft legislation is below.

Personal Tax
• Income tax thresholds and rates will be updated
• Details of the 50% tax relief scheme for SMEs (Seed Enterprise Investment Scheme) will be unveiled
• Statutory resistance test delayed until 2013
• Inheritance tax nil band and capital gains tax exempt amount to increase with RPI from 2015/16 and 2013 respectively

Corporate Tax
• Main corporation tax rate to reduce to 24% in 2013
• Improvements to Research & Development tax relief for SMEs
• Easing of conditions relating to real estate investment trust
• Bank Levy to increase to 0.088% from January 2012
• Changes to UK accounting practice

Charities
• Tax liability reduction
• Rate of inheritance tax to decrease to 36% when 10% of an estate is left to charity
• Withdrawal of Self Assessment Donate Scheme in April 2012.

What can I do?
With all the uncertainty it is tempting to simply shrug our shoulders and say, “…it’s out of my hands.” but that’s not the case. Worry about your little bit. If you can get you finances ship shape when everyone else is struggling there will be opportunities. Perhaps a bigger house, cheaper stocks & shares, bargains in the shops, but you’ll need to be in control of your finances to take advantage – Anything else is simply an illusion.

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Let’s face it, Christmas can be an incredibly expensive time, and often a time that our wage packets are unable to handle. In order to prepare for your purchases over the holiday period, you might be looking to apply for a credit card.

Everyone enjoys doing their Christmas shopping in their own way; you could be incredibly organised and have everything bought and wrapped by November, but most of us do it in early December, and inevitably leave some of it until the last minute.

However, with just 35 days  until Christmas Day, you will need to start thinking about applying for your new credit card so that it arrives in time for you to use it for your Christmas shopping.

Of course, there are several different types of credit card available and some take longer than others to arrive due to the way the card application process is handled.

Some credit cards are what’s known as ‘instant decision credit cards’ and they pretty much do what they say on the tin – you apply for the card online and the credit card company comes back to you with its decision within a couple of minutes, unless they need more information from you in order to make the final decision.

Cards that don’t offer an instant decision can take around 7 calendar days to get a decision to you.

Either way, you will still need to sign a credit agreement (some issuers allow you to do this online using a digital credit agreement), and wait for the card and PIN to arrive in the post so it is important that you apply now.

Here are the application deadlines for our top eight Christmas credit cards and have been calculated on the basis that you wish to receive your cards by 5th December, for those organised Christmas shoppers or 18th December 2011, for those who like to leave their festive shopping until the last minute.

It is important that you compare the credit cards available to you before applying to make sure that you choose the one most suitable for your needs (you should only make one application for credit at a time or it will make you look like you are desperate for credit and put off prospective lenders). To ensure that you receive your Christmas credit card in time for you carry out your festive shopping you should apply in plenty of time and account for any potential problems with the application.

Types of credit cards

The way in which you plan to use your Christmas credit card, combined with your credit rating, will affect the credit card you should apply for. Listed below are definitions of the different types of credit cards:

Instant decision

Instant decision credit cards provide many applicants with the result of their application within 60 seconds online. However, these results are not always instant if you do not meet exact criteria. If it is harder for the lender to judge your application, this decision will be delayed. These can be ideal for last minute Christmas shoppers as they are more likely to arrive in the nick of time.

0% purchases

Many credit cards offer customers introductory offers and deals to persuade them to take out their credit card. One of the most common deals for new customers is 0% interest on purchases for a fixed period of time. This is an excellent Christmas credit card because it allows consumers to buy all their festive gifts without having to pay high interest payments too.

0% Balance transfer

This type of credit card is designed to help consumers reduce the cost of their outstanding debt, as they can transfer high interest balances to a cheaper card. This card should not really be used for additional borrowing, but reducing the cost of existing debts. If you are looking for a card to do Christmas shopping a 0% purchases card may be more appropriate.

If you are looking to transfer a balance from another card because your last 0% balance transfer (BT) offer has run out and you need a 0% purchase deal for this year’s Christmas shopping, you can get cards that offer both a 0% BT and 0% purchase interest free period.

Credit-builder

If you don’t have a good or excellent credit rating, you might struggle to get accepted for a standard card. Credit building credit cards are designed to help consumers improve their credit score and their ability to access more affordable credit in the future. This credit card should not really be used to borrow money – you should really just use the card to pay for things and then pay the bill off in full each month to demonstrate to future lenders that you can manage credit sensibly. If you don’t pay your bill off in full each month, you will have to pay high interest charges because the interest rates on cards for building credit are higher than standard cards.

Rewards

These cards reward their customers for spending on their credit cards. Benefits can range from air miles to High Street gift vouchers. The interest rates are usually higher on reward credit cards due to the value of the benefits cardholders can receive. Rewards credit cards are best suited to people who use their credit cards regularly but always pay off the full balance every month. If the balance isn’t paid off in full each month, the interest charged will outweigh the rewards earned.

Christmas credit card tips

• If you have opted for a 0% purchases credit card, make sure you have the ability to repay the outstanding balance before the introductory period expires or you will face interest charges on your remaining balance once the 0% period ends
• Using credit cards for purchases of between £100 and £30,000 will protect you under Section 75 of the Consumer Credit Act, meaning that if a company fails to deliver your items (if it scam you or if it goes bust) you can claim your money back from your credit card company
• Compare credit cards to make sure you are getting the best deal.

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Choosing the right credit card can be tough. With hundreds of credit cards available through dozens of providers it can be tricky to find the perfect card.

So, to help you, we have put together this straightforward guide to the five things you should take into account when you compare credit cards.

1. Interest rate

When you are looking to apply for a credit card, the interest rate will be one of your most important criteria. You may be looking for a 0% balance transfer or purchase rate, or you may be looking for the most competitive long term deal. Or, you may want to use the card abroad and want the most competitive rate.

Make sure that you know exactly what type of deal you’re looking for before you compare credit cards. If not, you could end up with a deal that isn’t appropriate for your particular circumstances.

2. Fees

While the interest rate on credit cards might be the most important consideration, make sure that you also take any fees into account. For example, if you’re looking for a balance transfer offer then you may have to pay a fee of up to 3% of the balance you transfer. Always ensure you know what fees apply.

Make sure you also take into account the level-off fees for late payments, duplicate statements etc.

Sometimes paying a higher interest rate and a lower fee may benefit you. Do your homework and take both the interest rate and any associated fees into account when you do your credit card comparison.

3. Service

While great rates and low fees may be attractive, you will soon become disenchanted with your credit card provider if the service you’re getting isn’t up to scratch. Nothing is more frustrating than hanging on for hours on an automated telephone system or standing in a long queue at your local branch.

When you compare cards, have a look at the level of service offered by the card provider. For example, do they have a 24 hour online banking system that will allow you to check your account balance and make payments to your credit cards?

4. Application criteria

When you compare credit cards it is, of course, vital that you look at credit cards which you are eligible for. There’s no point finding a credit card with great rates and low fees if you aren’t eligible.

So, when you compare credit cards, make sure you check the eligibility criteria. For example, many cards won’t be available to you if you have any sort of adverse credit. Other cards have different criteria, such as a minimum level of income.

You’ll end up wasting your time if you don’t make sure you’re eligible for a particular credit card before you apply. Plus, if the application is unsuccessful, it’ll leave a ‘footprint’ on your credit report, which may make it harder to get accepted for the next credit card you apply for.

5. Other credit card benefits

In order to differentiate theirs from other credit cards, many banks and building societies now offer a range of additional benefits and perks to cardholders. These include insurance products, enhanced security on your credit cards, reward points and discounts for goods and services. Some cards also offer vouchers or cash back based on usage.

While additional perks might be beneficial, when you apply for a credit card you should not be swayed by short term incentives or one-off offers. Finding a card that offers a good interest rate and low fees can save you hundreds, or even thousands, of pounds in the long term and the savings on a good value card will often well outweigh the value of small incentives.

However, when you compare credit cards it is worth taking any additional benefits into account as this could sway your decision.

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Back in the “old days” before credit cards were so widely used, most people would hang on to the credit card they qualified for, regardless of how high the interest rate was. But with competition, you can save yourself hundreds or even thousands of pounds in fees and interest if you compare credit cards and are careful about how you use them. There are lots of good reasons why you should compare cards, particularly when it is so easy to do online.

For one thing, you can cut out a lot of interest by using a balance transfer credit card with a long 0% balance transfer rate. Right now the Barclaycard Platinum comes with a 20-month 0% balance transfer offer for new customers, the longest 0% term available. While there is a balance transfer fee of 3.2%, that still represents a huge saving over the average 16.9% interest rate on credit cards. If you already have a Barclaycard, MBNA has an 18-month 0% balance transfer card with a 2.88% balance transfer fee.

If you were to shift, say, £2,000 on to the Barclaycard, you would be charged £64 for the 3.2% fee. You could pay £115 per month and pay off that debt in 18 months. On a card with a 17% interest rate, you would have to pay £126.66 per month to pay it off in 18 months, so over the 18 month period, you would save around £280 in interest by switching, with a total saving of £216 once the £64 balance transfer fee has been taken care of.

Be sure that you understand the difference between a 0% balance transfer card and a 0% purchase card. Often, 0% balance transfer cards charge interest on purchases just like regular credit cards. This means that you should only use it to pay of a transferred balance. For new spending, you should consider a 0% purchase card.

With 0% purchase credit cards, you can make purchases interest-free for a set period. The Tesco ClubCard credit card, for example, has a 13-month 0% purchase period. This could be good if you are planning a big purchase, such as a new flat screen television. If you used your 0% purchase card to buy a television for, say, £750, you would have 13 months to pay it off without having to pay interest. You could pay £58 per month and have it paid off in 13 months and avoid interest altogether.

With either 0% balance transfer cards or 0% purchase cards, you must make sure you pay the balance off on time. With many cards, once the period is over, you start paying interest that would have accrued during the 0% period as well as new interest, so be sure to read the card’s terms and conditions carefully and avoid going past the 0% period.

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New research has found that the levels of saving in the UK fell in 2010 as consumers used their surplus funds to repay unsecured borrowing. The figures from professional advice website unbiased.co.uk discovered that over £12 billion of credit card debt was repaid last year; the highest level since the figures began in 2005.

Consumers using cash to pay low rate credit card debt

According to the research, repayments to credit card debt outstripped new lending for seven consecutive months to the end of 2010. The increase in repayments to credit card and unsecured debt was attributed to people wanting to reduce their debt in an uncertain economic climate as well as the fact that new borrowing was being restricted by banks.

The focus on repaying debt hit savings in the UK with levels falling from £20 billion during the first quarter of 2010 to just £15 billion in the final quarter.

0% credit cards are perfect for reducing debt

If you are planning to reduce your unsecured borrowing in 2011, 0% balance transfer credit cards could be the perfect answer. These 0% credit cards allow you to transfer your unsecured debt on to a nil interest rate for a set period.

They help you to repay your debt faster, as you have no interest to pay during the introductory period.

Many websites feature a credit card calculator which will help you analyse your balance and work out how quickly you can repay your debt. And, with an increasing price war raging on 0% balance transfer credit cards, finding a low rate credit card is easier than it has been for some time.

Overall, Britons repaid 14p of debt for every £1 they saved during the three months to the end of December 2010. So, if you want to repay your debt faster, 0% credit cards could be the perfect answer.

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If you have ever used your credit card to pay for goods or services online, you will probably have paid a credit card surcharge. Whether you have booked low cost flights, cinema tickets or even paid your council tax online, the chances are you will have paid a fee for using your credit card.

These charges have prompted the consumer watchdog Which? to launch a ‘super complaint’ in order that the Office of Fair Trading conducts an investigation into these fees.

Here’s our guide to how to cut your credit card fees:

Companies profiting on credit card fees

Prashant Vaze, head of fair markets at Consumer Focus, recently told the Daily Telegraph:  “Consumers are fed up with paying these surcharges. Often they have no other option, especially for internet transactions where there is no alternative to using cards. The worst offenders even ask for surcharges on a per person basis.”

The consumer champion Which? believes that consumers are paying ‘hundreds of millions of pounds’ each year in excessive credit card fees.

Interest on credit cards

High interest rates are another reason consumers are paying high card fees. So, borrowers have been urged to research the best credit cards for balance transfers and to move their credit card balance to another provider.

With a wide range of 0% credit cards on the market, there is healthy competition for the consumer. Heading online to research the best credit cards for balance transfers can save you hundreds of pounds every year, and moving your borrowing to 0% credit cards can help you avoid substantial credit card fees.

The last word comes from the chief executive of Which?, Peter Vicary-Smith. He said: “There’s simply no justification for excessive card charges – paying by card should cost the consumer the same amount that it costs the retailer. Companies shouldn’t be using card processing costs as an excuse for boosting their profits.”

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The New Year has started out with a few very good credit card offers, especially for those with good to excellent credit histories. A forecast by Santander noted that Brits could transfer more than £2.8 billion in 2011, with the average transfer being just over £1,000. This is down from the peak transfer rate of £2,290 at the end of 2008.

Millions of people have twigged to the benefits of switching to 0% balance transfer cards as a positive step toward managing their finances. But it is important to differentiate between 0% balance transfer cards and 0% purchase cards. Only rarely do you get both in the same card, and when you do, the 0% period may be different for balance transfers and purchases.

In most cases, using a 0% balance transfer card should be limited to balance transfers only, because interest rates on purchases average over 16%, and there is usually a much shorter 0% period for purchases when the card is aimed at people looking to make use of an interest-free balance transfer offer.

The Barclaycard Platinum with Balance Transfer credit card currently has the longest 0% transfer offer at 18 months (subject to a 2.9% admin fee). Plus, if you are transferring £3,000 or more to your new Barclaycard between now and the 28th February 2011, you will receive £20 off the admin fee you pay.

If you want a 0% purchase card, compare credit cards based on purchases.

The Tesco Clubcard Credit Card currently has the longest 0% purchase deal, at 13 months. After that, the representative APR goes to 16.9%. The Barclaycard Platinum Card offers 0% purchases for 12 months, plus reward points, while existing NatWest and RBS current account holders can get 0% purchases for 13 months with the Classic Card.

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The spring is a great time to consider transferring your credit card balance. With lots of interest free credit cards on offer, as banks compete for your business, you can end up saving hundreds of pounds by switching to the best balance transfer credit cards.

However, if you are transferring your credit card balance, it is vital that you avoid these three common mistakes.

1. Using your balance transfer credit cards to buy goods

Always remember that a 0% or low interest rate balance transfer deal means that the interest on your balance will be low. However, it doesn’t mean that the interest on your purchases will be low.  In fact, it may be the case that your purchases are charged at a much higher interest rate.

Even though your card payments are now allocated to the highest interest rate first, it is worth trying to keep your cards separate. Use one card for balance transfers and one for purchases.

2. Ignoring switching fees

Most credit cards charge a fee when you transfer a balance – often around 2.5 to 3% of the total transferred balance. So, make sure that you take any fees and charges into account when you compare credit cards.

If you expect to be able to repay your total balance in the near future, you could actually save money by staying with your existing credit card than paying fees and charges to a new card provider.

3. Not making your balance transfer immediately

The low interest period on balance transfer credit cards typically begins from the date your application is approved (and sometimes companies give you just a 60-day window to do a balance transfer), not the date you transfer the balance. So, if you delay in actually transferring your balance from one card to another, you will miss out on part of your interest free period.

When you make your application, many companies will let you specify any balance you wish to transfer to their interest free credit cards. Always do this as it maximises the benefit you receive from the promotional rate.

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When you’re shopping around for the best credit cards, you will probably consider one that offers 0% balance transfers if you carry a balance. It could save you big on interest charges. But the problem is that just a few companies issue most of the cards in use in the UK, and if you apply for a card that is allied with one of the companies you already have a card with, you probably won’t get the 0% offer, even if your application for a credit card is approved.

Interest free credit cards are great for people trying to get their debt under control, but card companies use lures like 0% balance transfers to attract new customers, and rarely offer the same rates to existing customers, even if they have outstanding credit histories. There’s no legal reason why they can’t do it, but they don’t do it because they see it as a draw for new customers only.

So if you were to try to get a Mint card and transfer your balance from your NatWest card, you wouldn’t be able to, because both cards are issued by Royal Bank of Scotland. MBNA issues the most different UK credit cards, with nearly 200 brands, while HBOS issues around 50 different cards.

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Valentine’s Day is coming up and, in addition to being an opportunity to do something nice for your beloved, it can be a lovely bright spot in the middle of winter. Whether you’re buying your girlfriend a piece of jewellery or taking your mum out for a nice dinner, it’s a good idea to pay for your Valentine’s Day gifts with credit cards. Here are three reasons why.

1. Credit Card Rewards

If you have them, cash back credit cards or rewards credit cards are often the best credit cards to use for making your purchases. Even if you have the cash to pay for your purchases you should consider using your rewards card instead, remembering to pay off the balance at the end of the month. If you pay by credit card, you will reap the cashback or other rewards, and if you use put aside the cash you would have spent and use it to pay off your balance at the end of the month you’ll avoid paying interest charges as well.

2. Credit cards with 0% interest rates

With a 0% purchase card, you can buy a pricey item and take your time paying it off without worrying about interest. These cards are by far the easiest way to “borrow” a few hundred pounds for a special purchase. Some of today’s 0% cards offer lengthy zero per cent interest periods.

One example is the Tesco Clubcard Credit Card, which offers 0% interest on purchases for 13 months, 0% interest on balance transfers for 9 months, no annual fee, and 500 extra bonus Clubcard points for signing up. When you first get a 0% purchase card you could set something up to send you a reminder before the 0% period ends. That way you’re less likely to miss the deadline, which will result in your interest rates reverting back to your standard APR, so any balance still outstanding will start to accumulate interest charges.

3. Credit Card Purchase Protection

Your protection under Section 75 of the Consumer Credit Act of 1974 offers you great protection if something goes wrong with the purchase of goods or services. With your Section 75 protection, both the credit card company and the company you made the purchase from are equally liable if something goes wrong, providing the item cost between £100 and £30,000. You do not have to seek compensation from the retailer first, though this is often the easiest way to get the problem sorted, and you are covered if the trader has gone out of business.

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