Government has forced credit card companies to sign up to a new code of conduct. What does this mean for the consumers?
Is this going to lower the rates people pay on their cards? Unlikely. Despite the new code of conduct, companies have not been forced to lower rates. Some are still charging 15-17% interest on credit card borrowings despite the fact that Bank of England’s base rate is down to 2% now. OK, credit card companies have other overheads like sending statements, bad debts etc but even then the difference between what they can borrow at and what they charge does sound a bit high.
Can companies increase the rates?
Of course they can if they feel that you are riskier now than before. E.g if you are missing on payments or even paying minimum payments then they may feel that you are struggling, and therefore a risky prospect.
So what is this code then?
Basically the code of conduct says that all credit card companies will have to write to their customers with at least 30 days notice if they are to raise the APR. This is so that the customer can apply for a new card elsewhere if they wish. And they can do this only once every 6 months.
If you apply for a new credit card and accepted, the company can not raise the initial rate for up to one year from the sign up date.
If the company is to raise the APR and you want to go elsewhere then you can take reasonable period of time to clear the outstanding balance at the same old low rate. Previously you had to clear all the balance in full.
Now these restrictions (i.e. companies can’t raise rates for a year) may well mean that there ay not be as many 0% introductory rates any more. But that is companies’ problem.
How long is the ‘reasonable period’?
Sadly this is not clear yet and may depend on the company itself.
What if I am about to go on benefits?
If that is the case then you may require some breathing space. let the credit card company know and they will give you 30 (or even 60) days to sort out your benefit claims before you can start paying off your credit card debt.
Can companies make other ‘hidden’ charges to compensate for any loss of profits?
We hope not. If you pay off your balance in full every month then you shouldn’t need to worry.
However it is fair to expect that the companies will continue to penalise those who make late payments or exceed their credit limits. Even the Office of Fair Trading considers £12 to be a "fair" penalty charge for such misdemeanours.
I am struggling with several credit card payments. What should I do? 
If you have several credit cards then try to move the balance to fewer and cheaper cards and cancel out the rest. You may seek an IVA (Individual Voluntary Arrangement) with some of your creditors.
You can even contact some of the following organisations for help or advice in arranging an IVA.
- Advice UK (020 7407 4070; www.adviceuk.org.uk)
- Citizens Advice (www.citizensadvice.org.uk) – Find Tel number for your local branch in your phone book
- Consumer Credit Counselling Service (0800 138 1111; www.cccs.co.uk)
- National Debtline (0808 808 4000, www.nationaldebtline.co.uk)
- Payplan (0800 917 7823, www.payplan.com)
I am a home owner and struggling with my mortgage payments. Can these organisations help me?
Probably not although you can ask. If you are considering selling your house then you can try your local estate agent However if you need to sell the house fast and also considering the possibility of selling and renting it back then you should contact specialist companies who offer such services. There are many but you may want to deal with a reputable company. One of them is Instant Angels.
- Instant Angles (0845 643 4183; www.instantangels.com)
Filed under: General
