New changes to the way credit cards are run in the UK came into effect in two stages this year, in both January and April.
The changes will affect the way debt is paid off, and in which order, as well as banning credit card cheques, unless they are specifically requested.
The first rule relates to how debt is paid off, when you make a repayment to a credit card company. In the past credit card companies would offset your payments against your cheapest debt, or the debt you were paying no interest on but this has now changed. Credit card companies must now pay off your most expensive debts first.
The second change will see one of the biggest changes to how credit cards are run for consumers and will see the minimum payment increase from being one that just covered interest and fees to one that starts repaying your balance. The new rule stipulates that all credit cards taken out from April 1st will require users to pay a minimum payment that includes all fees, interest and at least 1% of the outstanding balance.
Credit card cheques are now only to be sent to customers upon request, rather than as incentives to withdraw more money.
Customers can now also decide if they want their credit limit increased, rather than having it done without any say so. A credit card company wanting to increase someone’s credit limit must now send them a letter, with 30 days notice, and the customer has that period to decline the increase.
Customers will also have 60 days to decide if they want to accept a interest rate change, rather than the current rules that see them able to decline the increase, but have their card cancelled immediately.
One of the best changes for consumers is the rule change on repayments. Previously people wanting to pay a fixed amount of their balance each month could either pay the minimum balance, pointless if you wanted to pay off the balance, or the entire balance, often not practical. Payment of other amounts was only possible manually, but now customers can set up fixed payments each month of any amount to help pay off their debts.