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a helping hand - or a hand in your pocket?
Published: 29/06/2009 |
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Andrew Hagger of Moneynet.co.uk looks at a couple of product developments launched in the last 7 days. Lloyds TSB launches demand text balances – but at a price Lloyds TSB has today announced the introduction of ‘on demand’ balance updates via a mobile phone text message service. The offer is free for Premier and Private customers (and students until next August) however everyone else will have to shell out £2.50 per month for information which is already available via internet banking for free. You can get a weekly balance text sent to your phone free of charge, but if you want the ‘on demand package’ to help you manage your cash remotely it will set you back £30 per year. This will no doubt prove to be a convenient service for some customers however there’s no getting away from the fact that it’s also another potential revenue generator for the bank. With the outcome of the bank charges case still to be decided, providers will be increasingly on the lookout for new and lucrative income streams. Barclaycard cuts the minimum monthly payment requirement for some Barclaycard are kindly offering to reduce the minimum monthly payment for some selected customers from 2.25% to 1.5%. So for someone with a £3000 balance will now only have to find £45 rather than £67.50 as a minimum monthly payment. Whilst some customers will be glad of some additional leeway in their monthly budget that this move provides, the truth is that the short term gain will end up as longer term financial pain. In fact a £3,000 card balance at 16% APR with a minimum 2.25% (min £5) requirement would take 28 years to clear and cost £3942 in interest costs. Even by reducing the minimum repayment level by a seemingly insignificant 0.75% can have dramatic consequences – in this scenario you’d die before you reach the 111 years required to repay the debt and would rack up an astonishing £19329 in interest. Encouraging people to maintain a larger debit balance is a strategy that will only inflate the card provider’s bottom line. It’s a scenario we really need to be moving away from, low minimum payments are bad for your wealth and have helped fuel the huge levels of personal debt that are now causing heartache for so many. ENDS
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