Credit card customers who only make minimum repayments could have cards SUSPENDED under new rules
STRUGGLING Brits could have their credit cards suspended next month due to new rules by the financial regulator.
Credit card providers were in September 2018 forced to start notifying customers who'd spent 18 months only making minimum repayments on their debts.
The lenders were then given another 18 months to convince users to increase their payments by sending at least three letters.
This 36-month period comes to end in February, and customers who are persistently in debt and failed to respond risk having their accounts closed.
The move by the Financial Conduct Authority (FCA) aims to help the four million Brits who make minimum repayments on credit cards, which can lead to a lifetime of debt.
It said these people pay an average of £2.50 in interest and charges for every £1 that they repay, and expects the changes to save consumers up to £1.3billion a year.
But debt charity StepChange has earlier warned that the rules could mean Brits lose their credit card when they need it the most.
How to cut the cost of your debt
Being in large amounts of debts can be really worrying. Here are some tips from Citizens Advice on how you can take action.
Check your bank balance on a regular basis - knowing your spending patterns is the first step to managing your money
Work out your budget - by writing down your income and taking away your essential bills such as food and transport.
If you have money left over, plan in advance what else you’ll spend or save. If you don’t, look at ways to cut your costs
Pay off more than the minimum - If you’ve got credit card debts aim to pay off more than the minimum amount on your credit card each month to bring down your bill quicker
Pay your most expensive credit card sooner - If you have more than one credit card and can’t pay them off in full each month, prioritise the most expensive card (the one with the highest interest rate)
Prioritise your debts - If you’ve got several debts and you can’t afford to pay them all it’s important to prioritise them.
Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don't pay.
Get advice - If you’re struggling to pay your debts month after month it’s important you get advice as soon as possible, before they build up even further.
Groups and services like Citizens Advice and National Debtline can help you prioritise and negotiate with your creditors to offer you more affordable repayment plans
If you've not been able to raise your payments after 36 months in persistent debt (when your charges are higher than your repayments), your bank must offer a way to repay your balance over a reasonable period.
This is usually between three and four years and may involve transferring the credit card balance to a lower-interest personal loan.
If you can't increase your payments, the lender could reduce, waive or cancel any interest, fees or charges.
But customers who don't work with their credit card firm to repay their debts will have their account suspended.
In the most serious cases, hard-up borrowers could see their debts wiped completely but this will be decided on a case-by-case basis.
The Sun has asked the UK's major banks and credit card providers what actions they're taking and when these will begin.
Barclaycard said it's been writing to customers in persistent debt every month for the past 16 months.
The users who don't respond or take any action will have their account suspended in February, meaning they won't be able to use the credit card.
Nationwide also said it'll start suspending accounts from February for the credit card users who've not increased their payments, while TSB and Virgin Money told The Sun they'll do the same from March.
All four banks added that they'll offer personalised payment plans to affected customers with suspended accounts.
Lloyds Banking Group said it's currently developing "a number of options" to support customers in persistent debt.
The Sun has also contacted American Express, HSBC, Natwest and Royal Bank of Scotland. We'll update this article once we hear back.
A spokesperson for UK Finance told The Sun: "The FCA’s new persistent debt rules are designed to reduce the cost of borrowing by encouraging customers to pay back their credit card balance quicker, where they can afford to do so.
"There are some circumstances where the new rules require the credit card provider to suspend the card, for example if a customer does not respond or a suitable repayment option is not agreed, so it is really important that customers do not ignore any letters received.
"Read any correspondence carefully and contact your credit card provider to understand your options."
If you're looking to improve to improve your credit score, beware those boosting cards stinging users with up to 60 per cent in interest charges.
Credit card companies were last year slammed for charging millions of customers late payment and over-limit charges.
If you're struggling with debt, here's how to get out of debt in eight simple steps – and get advice for free.