New word of the month
Spending can seriously damage your wealth – new words and finance
by Kerry Maxwell

wealth warning noun [C] mainly British /wel w(r)n/
a warning on credit cards which charge very high interest rates and are therefore very expensive to use

‘Costly cards “need a wealth warning” … Warnings should be put on high-charging credit cards to shame banks into offering a better deal, a finance industry leader said yesterday.’
(The Daily Mail, 9th October 2006)

The summer holidays in the northern hemisphere are only a few weeks away, and many of us will start spending more money than usual as we prepare for a well-earned trip away from home. However if you’re considering going on a major spending spree with your credit card whilst on holiday, watch out – the card you use might carry a wealth warning.

In recent months some of the UK’s major credit card companies have pushed up interest rates to over 20% – way above the Bank of England base rate of 4.75%. Amidst the perception among finance experts that this is banking greed – equivalent to a profit margin of 200% or more – there has been discussion of the concept of a wealth warning, something which would indicate to consumers the financial consequences of using particular credit cards. The warning would read something like: ‘This credit card is charging you a rate of interest 200% above the Bank of England base rate.’

If you carry one or two store cards in your wallet, consider that these might be even more damaging to your wealth, with an annual percentage rate averaging at as much as 30%. Similar proposals relating to the inclusion of wealth warnings have been discussed for these cards too.

The expression wealth warning is of course a play on health warning, a term mainly associated with an agreement between governments and the tobacco industry concerning information about the harmful effects of smoking. In the United Kingdom, health warnings such as ‘Smoking kills.’ have been an obligatory part of cigarette packaging since 1971.

If your bank balance is struggling so much that using a credit card is inevitable, then maybe you should consider becoming a card tart. Clever spenders avoid or reduce the expense of credit cards by being card tarts, people who regularly switch their credit card provider in order to get the lowest interest rates. Card tarts, sometimes also referred to as card surfers or rate tarts, take advantage of the fact that credit card companies often attempt to entice new customers by offering them very low or sometimes even 0% interest rates. In recent months however, it looks like card tarts are fast becoming an endangered species, with certain credit card providers being much more selective about who they offer 0% deals to, and adopting measures such as a “one-off balance transfer fee”.

Spending whilst on holiday is one thing, a temporary assault on our financial resources. However perhaps the largest and most enduring financial commitment any of us make is buying a home. In the United Kingdom, property prices have been increasing steadily over a number of years, making it increasingly difficult for first-time buyers to enter the housing market. In a climate where people are finding it impossible to raise enough cash on their own, many are resorting to joining forces with others, a practice now referred to as co-buying, which has a related transitive verb co-buy and noun co-buyer. The most conventional co-buyers are members of the same family, sometimes covering three generations – children, parents and grandparents all sharing in the same investment. From this concept a new socio-economic term has recently emerged: the extended financial family, or EFF for short. But co-buyers don’t have to be related – a growing number of people are buying properties with friends and colleagues, and even complete strangers. This trend has spawned the expression mortgage mate, someone with whom a person shares the cost of a mortgage. Internet sites such as www.gohalves.co.uk act as a kind of ‘dating site’ for would-be co-buyers, helping them find their ideal mortgage mate.

Young first-time buyers are at one end of the spectrum, and retired professionals with a healthy pension and a paid-off mortgage are at the other. One of the paradoxes of life is that we only seem to have a reasonable amount of money at a time in our lives when we least need it. In recent years however, there’s an emerging trend of retired parents sharing these resources with their offspring. Instead of waiting till they die to pass on an inheritance, they are giving a proportion of their assets away whilst still alive, a practice now described as pre-heritance. Pre-heritance involves parents releasing capital or equity from their homes in order to give their kids the finances necessary to buy their first house or to cover the cost of weddings or education. It seems that parents are increasingly beginning to recognise the advantages of giving financial support to their offspring at a time when they really need it, and thereby also potentially avoiding the pitfalls of inheritance tax – tax paid on inherited money or property.

But not all parents give away all their hard-earned cash so readily. At the opposite end of the spectrum are the SKI-ers, retired folks who want to enjoy the fruits of their labour, spoil themselves with a few luxuries and see the world whilst they are still fit. If your parents are SKI-ers, don’t count on them for a future windfall, since SKI is an acronym of Spend the Kids’ Inheritance!

Why is it that money seems to disappear from our grasp far more easily than we acquire it? And for those of us who pay taxes, a chunk of our hard-earned cash disappears even before it hits our bank account. Paying tax is a necessary evil that affects the finances of millions of people, and so in recent years financial analysts have started talking about the concept of tax freedom day. This is a particular day in the calendar year when the average taxpayer can expect to stop working for the government and instead begin earning money for him- or herself.

In 2006, the UK tax freedom day was 3rd June. Across the Atlantic, taxpayers got a better deal this year, with the US tax freedom day falling on 26th April. However even when we’ve reached tax freedom day, the tax burden doesn’t necessarily end. What about the taxes imposed on the things we buy? Allegedly in response to the 21st century problem of obesity, these could now potentially extend to sugary, fatty foods and sweetened drinks, as governments across the western world continue to debate the pros and cons of a fat tax. Even more frustrating are those taxes that we don’t even know we’re paying, those new payments and tax increases that are introduced in a way that people don’t easily notice – in recent years described as stealth tax.

Of course another way people often lose money is through being the victims of criminal and fraudulent activity. In this age of electronic finance, the possibilities are widening daily, as we manage our bank accounts and submit credit card details online. One of the latest scams to join a range of Internet-based fraudulence is referred to as vishing, from a blend of the words voice and phishing. In the now well-recognised practice of phishing, an e-mail is used to con victims into submitting account details to a phoney website. With vishing however, rather than clicking a link to a website, victims are enticed into making a phone call to verify their account information. Vishing scams operate both through e-mail and Internet-based telephony or VoIPing, where a recorded message tells a person to call a particular number and submit their details.

If you like to do your banking on the high street rather than over the Internet, beware of the recently coined practice of shoulder surfing. This is where a fraudster hovers very close to someone standing at a cash machine and looks over their shoulder in order to obtain their PIN (personal identification number).

Whichever way we choose to shop, mail-order, online or on the high street, there are certain times of the year we undoubtedly spend more than we usually do. In fact the shopping frenzy from late November is so significant, for example, that in the US there’s now a way of identifying it. The term Black Friday has been in mainstream use in the States since the mid-eighties, to refer to the Friday immediately after the Thanksgiving holiday (which is usually the fourth Thursday of November). Historically this is one of the busiest shopping days of the year, with retailers opening early and offering discounts to entice shoppers into even more purchases. The use of the word black in the expression is thought to relate to the traditional accountancy practice of recording profits in black ink (and losses in red). And Black Friday now has a 21st century counterpart in the form of the expression Cyber Monday. This is a term coined in 2005 to refer to the Monday immediately following Black Friday. Back at work on the Monday after the holiday weekend, it seems that people continue shopping from their desk and, enticed by discounts offered by retailers in cyberspace, contribute to a massive surge in online sales.

For more information about new and topical words and phrases, read Kerry's Word of the Week articles on the MED Resource Site.