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Credit card companies to ring the changes

Credit card companies to ring the changes

Category: Credit cards

Updated: 29/12/2010
First Published: 29/12/2010

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The UK's 30 million credit card holders are set to benefit from a number of new rules that will give them greater control over their finances.

Perhaps the most eye-catching change will be that repayments will be used to pay off the most expensive debt first, meaning debt can be paid down quicker.

In the past, providers have used repayments to pay down the cheapest debt – a 0% balance for instance – first, meaning balances charged at a higher rate of interest continue to grow.

This has long been a point of contention amongst card holders and consumer groups.

It is thought that the change will directly benefit around a quarter of credit card accounts.

Card companies will also send an annual statement to customers clearly outlining how much they have paid back and how much they have used their credit card, while they will be excepted to give people advice on how to pay their debt off more quickly.

Other changes include:

  • Credit card companies will
    no longer send out 'unsolicited' credit card cheques, with restrictions also applying where customers request them.
  • Clearer communication if consumers are offered a credit limit increase.
    Before credit card limits are increased, consumers will be given 30 days in which to turn it down.
  • Clearer communication if the interest rate on your card is to be increased.
    Holders willbe contacted at least twice and be given 60 days to reject the increase and pay off existing debt at the existing rate (and to stop using the card).
  • More flexibility on choosing the amount of your credit card bill you wish to repay and the options to make that payment.
    Instead of setting up a regular payment to pay off the minimum of a bill or in full, people will be able to set up a regular payment for an amount of their choosing.

"These are important changes, and we are pleased they are being made as planned. At times like this it is vital that we do what we can to help consumers struggling with debt problems," said Joanna Elson OBE, chief executive of the Money Advice Trust.

"We believe these changes will not only help people repay their debts, but that they will also help prevent future debts."

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