Credit card firms agree fairer terms No more overnight interest hikes on credit cards.
12 December 2008
Card issuers have agreed a new set of fair principles with the government, which include giving borrowers warnings about rate increases and giving more breathing space to people struggling with their debts.
Rate control introduced for credit cards and store cards
Lenders have agreed that from the 1st January they will not increase interest rates within 12 months of a credit card or store card being taken out and not to increase them more often than every six months after this period.
The companies that have signed up to the agreement will not increase interest rates if the minimum repayment is less than 2 months late, has entered into talks with a debt advice service or already has a repayment plan in place.
Help for those with bad debts
Which? Money editor Martyn Hocking said: ‘This is a step in the right direction. If you pay your credit card balance in full every month then the APR (Annual Percentage Rates) will not affect you.
'But for those that struggle to make payments these measures go someway to ensuring bad debts don't escalate into serious problems.
‘We hope that this is just the beginning and that all credit card companies adopt the best practise of freezing charges, fines and interest for customers who have actively sought debt advice.’
Which? offers advice on switching credit cards and how to find the best credit card for your situation.
Notice given of interest rate increase
The agreement also means that credit card companies and store card providers will give at least 30 days notice of an interest rate rise. Customers will be given the option of closing their account and paying off the debt at the existing rate if they wish to do so.
The government said borrowers who had already experienced a hike in their interest rate, which in some cases could be as high as 10%, should complain to their card provider if they think the rise is unfair, or to the Financial Ombudsman Service if they are not happy with their lenders' response.
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