credit card ads

Last night, I was watching some rubbish on tv. It was on one of the commercial channels so I was plagued by ad breaks every quarter of an hour or so. One of the ads was for a Capital One credit card. It was advertising that Capital One has a lower interest rate than some other banks, and maybe you should switch to them to stop the interest from dragging you down.

This advert got me to thinking. If adverts reflect society then that means that its ok as far as society is concerned to be permanently in debt. But if you are forever in debt, then how can you get ahead. I find it really difficult to conceive of amassing any great sum of money, and think that it woud be a lot easier to try to get out of debt as at least you would have a goal to aim at. But then, how much harder must it be to contemplate having any money. And how much money must you spend on finance.

I guess people don't think about it too much. What should I be doing to change this? How can we make saving and investing more attractive?

a house is worth what someone will pay for it

I was watching Selling Houses Abroad last night whilst waiting for the Life on Mars finale (immense series by the way). The main focus of the show was a couple who had bought a 3 bed village house in south west France several years ago. After having their second child they decided that they wanted to upgrade and take on a renovation project so they put their house on the market and took out a bridging loan to buy a run down cottage and outbuildings in the surrounding countryside. Two years later they still haven’t sold their village house.

Part of this programme is usually a house doctor type section where the presenter comes in and tells them how poorly their house is presented. In this case the criticisms were well justified because the 18th century house had all of its rustic charm covered up in not very good quality modern materials. They agreed to spend £2000 to do up the place a bit. This was basically spent on repainting, putting in more kitchen units and changing the bathroom. The couple selling the house seemed perfectly reasonable during this part of the show and it is easy to live with “features” that are hard to sell.

The other reason that their house hadn’t sold was the price. It was being marketed at about €220,000. In nearby villages, there were larger houses in excellent decorative condition with sought after period features on the market at between €165,000 and €175,000. I appreciate that it can sometimes be difficult to gain comparables as the houses in this region are very individual, but still, not much research was required to find this out in the space of two years. In any case, the house was being marketed by 11 estate agents and each of them valued the property at between €165,000 and €175,000 despite listing it at €220,000.

When it was suggested that they drop the price, the couple were not happy. They had a reason for justifying their asking price. Another house a few doors away was also being marketed at a similar price. Funnily enough, it also hadn’t sold. It was rightly pointed out to them that if they actually wanted to sell, perhaps they should compare their house to other houses that had sold, not other houses that hadn’t.

In the end they agreed to drop the price. They worked out how much they needed to get for the house, and decided to list it at that price. Which was about €200,000. And herein lies the problem. Just because they need a certain sum of money doesn’t mean that anyone will pay that amount for the house. They need to forget what they originally hoped to get for the property and either take what someone will pay them for it, or sell their renovation project or they face losing both homes through bankruptcy.

housing market crash?

Again last week I watched an episode of Tonight which had a monetary slant. In this case it was about whether the housing market would crash or not. The gist of the programme was that there was a panel of three people, property search agent Phil Spencer, journalist Jonathan Maitland and columnist and landlord Rosie Millard. Then some experts presented a segment on whether they thought the housing market was on the brink of crashing or not. The conclusion was that Millard and Spencer (who both have something to lose if there is a crash) thought that there wouldn’t be a crash and Maitland thought that there would. Spencer was more confident that Millard.

It wasn’t the greatest show ever, but it wasn’t too bad. I cooked and ate my dinner whilst watching it so I didn’t exactly give it my full attention. It got me thinking though about the main factor that I thought they didn’t mention. General inflation.

You see when you’re borrowing a fixed amount of money, inflation is your friend. Every year that goes sees the relative cost of a mortgage payment dropping with the miracle of compound interest.

If I don’t move house and wait long enough, my house will be a rent-free place to live. What more could anyone want. In any case, eventually any house is likely to be worth more than it is today. That’s inflation for you.

i can’t believe people gave banks this much money

The other week I watched the ITV 1 show Tonight with Trevor McDonald. This edition was about the popularity of claiming back bank charges and featured Martin Lewis of www.moneysavingexpert.com (which is a great website, by the way).

As a little background information, it is standard practice in the UK for banks to charge about £30 for a bounced cheque or for exceeding your overdraft limit or other similar activities. This is supposed (under the Banking Code) to reflect the costs to the bank of processing these – they send out standard letters and so on telling you that you have exceeded your limits etc. It is widely believed that these charges are unfair, to the extent that they are unlikely to stand up in court as the actual costs to the bank is less than £5.

If you have paid any of these charges in the last six years, there are a number of websites (here, here and here) that have forms and standard letters you can download to claim this money back. As far as I know, these charges have not yet stood up in court and the Office of Fair Trading is currently investigating the fairness of the charges and is widely expected to rule that they are set too high.

Anyway, what actually struck me during the show was the amount of money that people had paid in bank charges. Some of them were getting back several thousand pounds.

Who has that kind of money, to just throw away in the general direction of their bank?

If it was me, I wouldn’t be jumping up and down with joy that I now had a substantial bonus, I’d be feeling sick that I’d wasted a substantial amount of money because I wasn’t able to manage my cashflow properly.

Don’t get me wrong, its not like I’ve never made a mistake with the balance in my account. I think the charges are ridiculously high. I think if you’ve been subject to them you should attempt to claim them back from the banks and sooner rather than later. But, especially if you are owed a large sum, you might want to examine the reasons that you let this money go in the first place, next time you overspend you might not be this lucky.