Print Article for : Percentage Of Middle Class

Your Online Guide » Guide to Finance » How To Handle Finances

[P197]Percentage Of Middle Class

by ,

A study carried out by Axa reveals that about three-quarters (72 per cent) of Britons earning at least 30,000 pounds a year are looking to cut back on their spending over the course of 2008. Meanwhile, 15 per cent of those surveyed state that they have been forced to get another job or coerce a non-working member of their household to find employment in a bid to bring in more income. In a further attempt to reduce pressures on their spending, just under half (44 per cent) of respondents state they will dine out less often. Meanwhile, some 21 per cent claim they will spend less time socialising with friends.

Due to such difficulties with managing money, it may be possible that consumers develop problems with making repayments on personal loans and credit cards, as well as meeting the cost of mortgages, council tax and household bills.

Steve Folkard, spokesperson for Axa, said: "It's no wonder that households with above-average incomes are struggling to cope. A typical family in middle Britain may have a higher than average income but millions are weighed down by high lifestyle costs and face tough choices as the strain on their finances takes its toll. One of the biggest issues however is that many seemingly well off households lack the motivation to tackle their problems. We've had it easy for so long and been happily spending without thinking of the consequences that now people aren't sure what to do."

He went on to report that unless such consumers take steps to sort out their money management now, they may encounter difficulties as they get older. Mr Folkard pointed out that when planning for retirement people must make sure that they will have enough money to fund their intended lifestyle.

However, in a bid to reduce their expenditure, it was revealed that a significant number of families could be placing themselves under greater financial risk. An estimated 1.1 million households are considering not renewing their life and critical illness cover this year to help them to cut back on their spending.

Meanwhile, a fifth of middle class Britons have either stopped or lowered the amount of money that they put into a pension scheme. An estimated 15 per cent of people state they are doing this due to their need to make debt repayments, with 30 per cent citing a lack of disposable income at the end of the month. Overall, the rate of inflation that middle class consumers face was placed at 5.7 per cent.

For those people who are concerned about their ability to manage their money as the year progresses, getting a debt consolidation loan might be of assistance. By applying for a consolidation loan, consumers may be able to pay off various spending demands - which could range from life insurance costs and credit card debts to utility bills and existing loans - quickly and effectively. In addition, the aid with finance that such a loan provides may assist borrowers in increasing their levels of disposable income. Such money could then be placed into a retirement fund or other type of savings vehicle.

Debt consolidation could also be of assistance to Britons struggling with rising living costs. In a recent study, the Motley Fool revealed that 93 per cent of people disagree with the government's 2.2 per cent official rate of inflation. The average consumer believes in actuality such inflation stands at 8.1 per cent.

Think again! In today's economic climate, most financial institutions are calling you, me and other banking customers deadbeats behind our backs! Why?:

* Banks make far less money on good citizens and savers like you and me. If you're paying off your credit cards every month, you're not a “good” customer.

* The revenue on your account is low compared to the usury APRs earned on other accounts. So you're disposable.

* Most lenders want customers willing to maintain huge credit card balances and pay 33% interest.

* Credit cards and lines are being closed for countless Americans… even those with a spotless record and credit scores over 800.

Let me tell you about my own recent financial problems. Remember, I'm a Certified Credit Analyst!

I used one of my credit lines (with my 800+ credit score) for a short-term loan with a major bank. I needed to do this to keep the credit line open. I paid off the loan the very same day. Then… I got the bill. For having the money 10 minutes I was charged 181.32% APR! And no -- this wasn't a transaction with one of those corner “Cash Your Check” outfits. I was a customer with a high profile multi-billion-dollar bank which has already received billions more from our tax dollars.

What could I do about this unfair practice? Nothing! I had to use my bank's services or my credit line would be closed and I would have risked losing my good credit score. If a financial expert can't escape this, what hope does the average American have?

Many banks are making less than they did when they were financing sub-prime mortgages and sub-prime credit cards. They're not yet grasping the fact that such usury profits were never meant to be the norm.

To please stockholders, banks are cutting expenses by penalizing the Middle Class. Why? Because we're paying our bills in full every month!

Maintaining an account costs your bank a few cents every month. If you don't use your credit cards every month, the lender's revenue is lower. To improve the balance sheet and the profit margin, banks feel they must cut us out by closing our cards or forcing us to use a credit line and pay an obscenely high 181% APR.

Yes, we prudent savers who do not abuse or overuse credit are considered “deadbeats.” We have a high credit score but not a high “Revenue Score.” That's a number indicating (to a bank) how much revenue that can be expected from you. If you have an 800+ score you make less revenue for the bank, unless you charge tens of thousands on your credit card. Did you notice you get fewer credit card applications than your neighbor who's buried under credit card debt? His “Revenue Score” is higher than yours. He pays a lot of interest. He's a “better” customer.

With a low Revenue Score (as I have) you'll likely get a letter from your credit card company saying: “We regret to inform you that we have closed your Credit Card account. Our decision was based on the inactivity of your account.”

That happened to me. I had used the card for seven years and stopped when my credit card account was sold to a huge credit card company. As an informed consumer I wanted their new contract to get as much information as possible to manage my account within the credit card company's “rules.” I received two cards, but no contract. A few weeks later they closed my account. My credit score fell 48 points overnight to below the 800 mark. That's disturbing and frightening because that makes me a bigger risk than I was before, although I did nothing wrong!

Being a Certified Credit Analyst, I have many clients with good credit who are fighting to raise their scores by understanding the system better. Essentially I became my own client! I had to write my credit card lenders and inform them I'll go to every possible forum to keep my card open AND my credit score intact.

The amount of borderline legal and illegal activity happening with banks lately is shocking. People are being put into collection because they are tricked into unwanted charges. This can often happen when banks close and when credit card giants take over an account. It can even happen when you move to another state with your cell phone!

Such “banking mistakes” were once rare. But now we're sliding rapidly into an unethical and immoral business world which already destroyed the “sub-prime” clientele. Some banks and other lenders are now going after the middle class: They create situations to charge you high late payment fees. They invent all type of scores. Every move in our lives is scored and analyzed to a point where we have lost all our freedom and privacy, and none of us can be a good customer or a winner anymore. In addition to your classic FICO score (that's a whole story unto itself -- visit www.myfico.com), you also have a “Behavior Score”… “Transaction Score” … “Response Score” … even a “Bankruptcy Score” (you needn't be in Bankruptcy!).

My advice for average Americans:

1. Use your credit cards every month for at least one transaction.

2. If your inactive credit card account is closed, fight the credit card company. Send them letters! Seek help from a financial professional!

3. Protest when a credit card company lowers your limit. Tell them you'll charge only under 7% of what their limit is, because you want to have a low “Utilization Rate” to keep your score. That means, if you have a $1,000 credit limit, you can't use more than $70. They'll want you to use their card for more than $70, so they may give you a higher limit. It's a compelling argument!

4. Check your credit every two months. Sign-up for a monitoring system on myfico.com.

5. Pay your bills before the “reporting date” not the “due date.”

6. Read the new “Credit Card Holders Bill of Rights” which passed Congress and which has yet to pass the Senate because of lobbying efforts by the banking giants.

7. Seek decent banks and Credit Unions. Check their track record with the Better Business Bureau and other forums.

I offer this advice because I'm a single mom who doesn't want my kids to pay in the future!

Article Source : Pg. 179

Monika Nagy has sinced written about articles on various topics from Finances. . Monika Nagy's top article generates over 1000 views. to your Favourites.