Selling your endowment policy 'could provide a financial cushion'

Britons have an estimated 38 million unused credit cards lying around with a combined credit limit of £200 billion, new research has revealed.

Almost one in ten consumers admit they have as many as four credit cards which they no longer use, while seven per cent have five or six stored away, the survey by uSwitch.com found.

Louise Bond, personal finance expert at the website, said with unemployment and the current credit crunch, it is no wonder why some people feel they should hang on to their credit cards, in case they need a financial cushion.

There could be other ways to make a household more monetarily stable. Britons who have already considered raising money through surrendering their unwanted endowment policies may not realise that they could get more than their insurance company could give them by selling their policies on the secondary market to firms such as aap.

When broken down, credit card hoarders have an average £11,969 to dip into should they find their household income is reduced, or an unexpected large expenditure is required.

"Hoarding as many as six unused credit card accounts is excessive. It is a problem for both the credit card industry and individuals," Ms Bond said.

"In recent years, we have seen providers close down these accounts or, in some cases, introduce a fee for consumers that don't use their credit cards."

Many Britons may be holding on to credit cards as a financial safety net should an unexpected event occur, such as redundancy.

With recent figures from the Office for National Statistics showing that UK unemployment continues to rise, having a spare credit card may give some consumers peace of mind.

However, consumers should be cautious of returning to credit in order to give them the financial security they are looking for in case household income drops in the future and they cannot pay off the balances.

For those Britons who have already considered disposing of their unwanted endowment policies - and may have decided to surrender them - there could be another way.

A spokesperson for aap - the UK's biggest buyer of endowments - said that selling a policy on the secondary market could give people a financial cushion they are looking for. Some of aap's customers have already sold their underachieving endowments to meet debt management commitments.

He added that if aap decides to make an offer on an endowment, it will always pay more than the surrender value.


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