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Cards Used For Repayments

Figures now show that over one million homeowners have used a credit card in the last year to pay mortgage repayments or rents.

Around 7.5% of those aged 18 24 said they had had to use a credit card during the last twelve months.

An executive of Shelter has said that the credit crunch has affected the interest rates and housing costs making them unaffordable to a rising number of people. Many people trying to keep a roof over their head have on occasions had no option but to use a credit card to made a rent or mortgage payment.

This is now becoming a big problem and is likely to get worse as housing costs continue to rise but consider those using a credit card for this purpose could be doing more harm than good to themselves.

Most credit card companies charge between 15% and 18% interest rates that are almost 50% higher than the average sub-prime mortgage interest rate. For customers with poor credit ratings some companies charge up to 40% interest rate this being forty times more than the average mortgage rate.

It is considered that if people are using credit cards then they possibly should not have had a mortgage in the first place and advisers must ensure that their clients can afford the mortgage deal on offer and clients should take a look at their spending habits.

Credit card holders 'won't pay inactivity charges'

Nearly three quarters of Britons who have credit cards that they don't use regularly say that they would close their account if a charge for inactivity was introduced, a new survey shows.

Since Lloyds TSB announced that it would introduce a 35 one-off charge for some customers who were not using their cards, speculation has been rife about whether other card providers will follow suit.

But many consumers would not be prepared to pay such fees, the poll from moneysupermarket.com suggests, with just under 26 per cent saying they would switch credit cards and under one per cent claiming they would start spending on their cards again to avoid the charges.

Head of credit cards at moneysupermarket.com Rob Kenley said that consumers should keep an eye on their credit card and swap to another provider if they are unhappy about fees.

He advised: "Additionally, card holders should make sure they have the correct card for their needs, such as a zero per cent introductory offer for purchases if this is to be the sole use of the card, otherwise high APRs could be another burn on the pocket."

Londoners 'rewarding themselves more with credit cards' When it comes to credit cards, Londoners are best for making the most of their rewards, new research suggests.

In the three months from November to January, 39 per cent of London credit cardholders redeemed an average of 349 on loyalty schemes attached to their cards, through extras such as retail vouchers, cash back and travel rewards.

This compared to 37 per cent of northerners who have redeemed their points in the last three months, at an average value of 49.

Around 76 per cent of British cardholders have a loyalty credit card and the most popular schemes are the ones which offer a variety of retail partners through which loyalty points can be redeemed, according to Patrick Muir of Goldfish, which carried out the research.

He commented: "Credit card reward schemes are a great way for cardholders to be rewarded for everyday spending, but there is no point in having one if customers do not redeem their points. Savvy spenders should consider cards that offer them a tangible benefit or reward for their spending."

Recent analysis from price comparison service MoneyExpert.com has confirmed that credit card providers have increased the free travel insurance perks they offer on cards over the last ten months, with the average level of cover increasing by 23,000.

Credit card borrowing falls further

Britons are borrowing less on credit cards, due to a change in consumer attitudes, an official report claims.

Figures from the British Bankers' Association (BBA), which represents the major banking groups, revealed that credit card borrowing fell by 496 million in January 2006, continuing an average monthly fall of 219 million over the past six months.

Meanwhile, mortgage borrowing continued to rise, growing by 5.6 billion in January, following on from an increase of 5.7 billion in December.

Incoming chief executive of the BBA, Angela Knight, said that the continuing fall in credit card borrowing was an encouraging sign that people were managing their finances better.

BBA director of statistics David Dooks commented: "We can see that the January sales did not encourage borrowing on credit cards. As in the second half of last year, card borrowing is contracting and, with weaker retail sales being reported, this reflects the consumer's current attitude to spending and their commitments."

He added: "Mortgage lending continued to be buoyant, as we expected following the high volumes of approvals in the final quarter of last year."

Advice for using credit cards abroad

When it comes to using your credit card on holiday, it seems that not all cards are created equal.

According to personal finance site Find.co.uk, most credit cards charge a foreign exchange loading for converting spending to foreign currency, which can cause a nasty surprise when you receive your credit card statement.

Defaqto research shows that the average foreign exchange loading across all credit cards is 2.66 per cent, yet a few don't charge it at all, making it worthwhile to find the right card.

Another pitfall according to Find.co.uk is dynamic currency conversion (DCC), which is used by some retailers abroad to convert purchases into your home currency, but uses an exchange and commission rate of their choice, meaning extra costs of three to seven per cent.

If a merchant wants to use DCC they have to inform the card holder at the time of the transaction, the site said, although this is not always the case. Many card issuers, including Nationwide, recommend that cardholders always pay for things in the local currency, to get the best exchange rate and commission charges.

Kate Marsden, marketing director of Find.co.uk, said: "Using your credit card abroad can be a minefield, so be aware of how much your card provider is charging for foreign currency transactions and ensure that you get charged at point of sale in the local currency, rather than sterling."

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