Now customers will be able to get a better deal, and will gain better control over their card accounts as the new rules under The Lending Code come into effect.
The significant changes under the new rules are:
- The debt that is the most expensive will be paid off first. Making a switch over to the positive order of payment is good news, especially if the credit card has been used for more than one kind of borrowing such as purchases and balance transfers. As per the UK Cards Association at least 25% of all the card account holders are most likely to benefit due to this change.
- There will be new changes towards the end of March as the minimum payments on the new credit card accounts will cover the fees, charges, interest, and 1% of the outstanding balance.
- Credit card cheques that are unsolicited are banned and customers asking for them will have to face new restrictions.
- There will be a warning before the credit limit is increased and there will be a 30-day period to turn down the offer.
- Customers would be informed by their issuers about the rise in interest rates, and they will have an opportunity to reject the rise and switch over. Customers would be informed about the rise at least twice, and they will have 60 days to reject the same while paying off their current debts at the prevailing rates.
- Paying off credit card debts will become more flexible as one can make a choice in making payments, where they can opt to pay the minimum or the full balance and the amount can be set up by the customer, if it is a regular payment.
- The card company will contact you and give a warning if only the minimum payment is made regularly as this could increase the interest rates and thereby cause problems in the future.
Joanna Elson, chief executive, Money Advice Trust states that these are significant changes and is pleased that these changes have been incorporated. She feels that during such times it is important to help consumers, who are struggling with paying off their debts. She also believes that these changes will not only help consumers in repaying their debts, but will also aid in preventing future debts. This positive outcome has also been the result of the collaborative efforts from the UK Cards Association, she said.