Fraudsters finding it harder to operate thanks to prepaid cards
6th June 2011
After the recession, many consumers have found it incredibly difficult to get accepted for any credit and debit cards. A less than perfect credit history often means that many people have been forced to look at other ways to get the money that they need. Banks and lenders have become stricter with their lending criteria and more people than ever before are being refused credit cards. Prepaid cards are one way in which people can control their money without getting into further trouble.“
The rise in popularity of prepaid cards has left fraudsters unable to con people out of thousands of pounds. Even if a fraudster was to get hold of the card, they would need the chip and in to buy anything offline or to withdraw money. They would also only be able to spend whatever is on the card. For many people they do not keep a lot of money on the card at any one time.
It is estimated that around 20% of Britons are targeted each year by fraudsters. Only two credit card companies currently offer specialist protection against ID theft. There is no guarantee that you will get the money back if it is stolen. With a prepaid card it gives you the peace of mind that even if you lose your money, it will not devastate your finances. Credit cannot be obtained and once the money has ran out the fraudster would have to use their own money to top it up again.
There is a downside to prepaid cards over prepaid credit cards however. If your card was to be stolen, with a credit card you would be legally entitled to some form of protection. With prepaid cards there isn’t any protection that you are legally entitled to. This is mainly because it isn’t tied to a bank account. There will be no paper trail to follow due to the fact that most people use them to shop online. This makes it difficult to trap the fraudster.
While you are better protected against the risk of debt with a prepaid card, it is recommended that you only ever top up the amount that you need on the card. That way if it does become stolen, you will not lose a lot of money. You are still not fully protected against ID fraud with this type of card either. Depending upon which method of payment you use to top the card up, a fraudster could get your details from a statement. They can then use this information to apply for credit and debit cards in your name.
Overall the recession has forced more people to apply for alternative options such as the prepaid card. This has made it a lot more difficult for fraudsters looking to carry out identity theft. While prepaid card owners may not be 100% protected, they are still better protected against debt than a credit card user. There are many benefits to prepaid cards and this is just one of them.
Toxic assets: £3.6bn in credit card debt written off by lenders in 2011, but why?
14th May 2011
Everyone knows the feeling of worry and anxiety that strikes when your income just isn’t enough to cover the cost of living, and with unemployment figures and living costs always on the rise in the UK, it’s easy to see why more and more people have been turning to credit cards, personal loans and payday lenders to give their finances a bit of a boost.
However, it seems that for many people, these loans just aren’t enough to help them escape their financial troubles, as recent figures from the Bank of England suggest that UK banks are writing of phenomenal amounts of credit card debt every year.
It was revealed that in 2011, British banks wrote off a total of £3.6 billion in credit card debt. Worryingly, this figure is low compared to previous years.
The amount of credit card debt written off annually by banks has been steady or increasing since 2006. From 2006 to 2008, banks wrote off £3 billion a year in credit card debt.
The 2008 banking crisis caused these figures to grow. In 2009, the banks wrote off £4.12 billion in credit card debt alone, and in 2012, they wrote off an astonishing £5.32 billion.
As a result, the figures from 2011 represent quite a significant drop, to levels that are more similar to the period pre-banking crisis.
Regardless of this, £3.6 billion is still an unimaginable amount of money. Why do the banks decide to let so much money go?
The answer is that the banks see this money as “unrecoverable”. In many cases, the borrower simply does not have access to the money, because of reasons like unemployment and other debts. According to the Lewis Alexander Financial Blog, “personal debt becomes the last thing that [people] are able to pay as the priority bills such as electricity or gas, water and council tax are also mounting up.”
Over 119,000 people in the UK were declared insolvent in 2011 according to the BBC, and although this represents a fall in the number of bankruptcies in 2010, it still means that the banks were left with a large amount of money that they simply would not receive in repayments.
Additionally, banks may write off debt that would not be profitable for them to collect, for example, if the cost of collecting the debt was too high.
As a result of having to write off more and more credit card debt as the years go on, banks have now become more reluctant and careful when it comes to approving credit cards to borrowers. According to David Black from Defaqto: “Most of the major lenders have become very choosy in the last few years about who they will lend to with a card.”
In some ways, Black claims, this is positive, as it prevents many people from accumulating debts that they simply cannot pay. However, it also means that a lot of borrowers, who would have relied upon a credit card, are denied the help they need.
Credit cards were an even more problematic area for borrowers at the time, as credit card interest rates were at their highest since December 2001. With interest rates in 2011 sitting at around 17.3%, with some customers paying as much as 30%, it’s no surprise that many people found they were out of the depth when it came to credit card debt.
As of yet, we don’t know the total amount of credit card debt that the banks will have to write off this year. However, with great alternatives to credit cards, including personal loans with interest rates as low as 5.8%, we could see another fall in the amount of money lost to debt.