Credit card borrowers hit by higher minimum repayments

A number of high street credit card lenders have reduced interest-free terms, withdrawn products and increased minimum monthly repayment fees within the last week.

Sainsbury’s Bank’s Dual Offer Credit Card Mastercard previously offered a chart-topping 0% interest term of 27 months, has now reduced its interest-free term to 26 months. Sainsbury’s Bank has also reduced the interest-free term on its Balance Transfer Credit Card Mastercard from 29 months to 28 months, while also increasing the balance transfer fee to 3.00% from 2.74%.

Meanwhile, Tesco Bank reduced the interest-free term on balance transfers on its Clubcard Credit Card for 28 Months Balance Transfer Mastercard from 28 months to 26 months and renamed the card to reflect the new interest-free term, while also removing the 0% purchase term on the card, which was previously three months, and reducing the 0% money transfer term to 12 months from 28 months. Tesco Bank has also temporarily withdrawn its 12 Month All Round Clubcard Credit Card Mastercard, 15 Month All Round Clubcard Credit Card Mastercard and its Clubcard Credit Card with Low APR Mastercard.

In addition to this, in the last week Halifax, Lloyds Bank, MBNA Limited and Bank of Scotland have all increased their minimum monthly repayments. Halifax, Lloyds Bank and Bank of Scotland have increased the minimum monthly repayments on all their credit cards from 1.00% or £5.00 to 2.50% or £5.00. MBNA Limited has increased the monthly repayments from 1.00% or £25 to 2.50% or £25.

Consumers looking for a loan will find that Bank of Scotland, Halifax and Lloyds Bank have all reduced their unsecured personal loan limits from a maximum of £50,000 to £35,000. In addition to this, on Tuesday this week Admiral temporarily withdrew its unsecured personal loan from the market.

While these credit card and loan changes will unlikely impact existing customers, it comes at a time when many consumers are struggling financially due to the Coronavirus pandemic and banks are being encouraged to do more to help those facing financial difficulties due to the pandemic. Today, for example, the Financial Conduct Authority (FCA) announced proposals that would in part see banks offer a temporary payment freeze on loans and credit cards to those in financial difficulty due to the pandemic for up to three months.

Commenting on the credit card and loan changes, Eleanor Williams, finance expert at Moneyfacts.co.uk, said: “One benefit to consumers regarding an increase to the minimum credit card repayment would be that those who habitually just pay their minimum payment would likely reduce the time it takes them to repay their total debt.

“However, those who may be experiencing any concerns around disruption to their income and their ability to meet payments would do well to get in touch with their provider early to discuss what options may be available to assist them. Citizens Advice Bureau and the Money Advisory Service could be useful resources for those who require support.”