Credit cards and coronavirus

We help you understand the options available around credit cards during the coronavirus pandemic – and look at whether you can claim for refunds for cancellations if you paid by credit card.

We help you understand the options available around credit cards during the coronavirus pandemic – and look at whether you can claim for refunds for cancellations if you paid by credit card.

Anelda Knoesen
From the Money team
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Posted 16 JUNE 2021

Please note: The information in this article was correct at the time of publication on 16 June 2021 but because of the impact of COVID-19 things are changing rapidly. We aim to keep this page updated. But check with your card provider or potential provider directly, to confirm any details. 

What should I do if I can’t meet my credit card minimum payments because of coronavirus?

Don’t just miss your payments, let your card provider know you’re having problems and ask them what they can do to help you.

Since the start of the pandemic in March 2020, the Financial Conduct Authority (FCA) has put in place guidance for credit card providers to offer immediate support to customers facing temporary payment difficulties due to circumstances arising out of coronavirus.

If you haven’t already had a credit card payment holiday

Unfortunately, the deadline for credit card payment holidays passed on March 31st 2021. That means you are no longer able to apply to freeze your payments – although you can extend an already existing payment freeze. No holiday is supposed to extend past 31 July 2021. So you’d have had to apply before your February 2021 payment to get the full six months (three-month payment holiday plus an extension of three months).

If you take advantage of a payment holiday you won’t have to make monthly payments, but don’t forget the interest will continue to add up and will be added to your overall bill. So you’ll end up paying more overall for what you’ve borrowed. Weigh up whether that’s worth having the breathing space for a few months.

If you’ve already had the full payment holiday

Your credit card provider should offer you tailored support that reflects your personal circumstances, if you’re still having difficulties because of coronavirus. Your card provider is likely to ask you to fill out an income and expenditure form so that they can see your full financial picture before making a decision. Some might ask you to complete the form before you contact them. If you can, check your provider’s website to see what you need to do to help speed up sorting this out.

The FCA has told card providers they need to “treat consumers affected by coronavirus fairly and to help customers bridge the crisis and get back to a more stable financial position.”

Your provider should still give you time and the opportunity to repay your debt, and shouldn’t pressurise you into paying unreasonably quickly.

Among the things your provider could do to help is suspend, reduce, waive or cancel interest, fees or charges in an effort to stop your balance from increasing.

They should also put in place a sustainable repayment arrangement that’s affordable for you and is mindful of your other debts and essential living costs.

Financial firms have been told by the FCA that they need to be flexible and offer a range of both short- and long-term solutions to help customers facing financial difficulties.

Once your card provider has suggested a course of action, you should be given time to consider your options and, if necessary, get debt advice before making a decision about your options and the support you’ve been offered. Your card provider can refer you for debt advice where this is appropriate. 

It can be a good idea to get free, specialist debt advice to help you come up with a plan for sorting out your overall situation in a way that’s manageable. Advice is available online, over the phone and potentially face to face too – although this is not always possible because of the pandemic. Get debt help, in a way that works for you, with the Money Advice Service debt advice finder tool.

Whether you’re asking for your first payment holiday or to discuss further options with your provider, check their website to see if the quickest way to contact them is online or by phone, as some companies are still experiencing long queues at call centres. Make sure you have your card details ready to save time.

I am coming to the end of a credit card payments freeze. What will happen?

Your credit card company should contact you in good time as you come to the end of a payment freeze, to find out if you can afford to resume payments. If so, they should agree a plan with you for how the missed payments can be repaid. If you can afford to make some repayments – even if it’s a smaller amount than usual – you should continue to do so. If you're coming to the end of the freeze period and you haven’t heard from your card provider, you should contact them. 

If you’re still experiencing financial difficulties, your card provider should offer you tailored help based on your own individual circumstances. But please remember that you shouldn’t continue to miss payments without making an arrangement with the card provider.

How does a payment holiday affect my credit card debt and my credit score?

The FCA has warned that although payment holiday measures were designed to help you, they may result in increased costs in the longer term. This is because interest continues to build during the three-month holiday period and any extension. 

Think carefully before you enter into one of these arrangements and only do so if you need immediate, temporary financial help.

The FCA has told firms not to report payment holidays as missed payments on customers’ credit files.  But prospective lenders will be able to see that you’ve been under financial stress, so may choose not to lend to you in the future. If you need further support at the end of the payment holiday, this will be reflected on credit files in the normal way. In other words, it will show on your credit record.

This is so lenders have an accurate picture of your financial circumstances, to help reduce the risk of you borrowing more than you can afford to repay. Your lender should be clear about what effect any support they offer you could have on your credit file. Lenders may also take into account things like bank account information, how you use credit and how much you are in debt when deciding whether or not to lend to you.

I am a vulnerable customer or I need to help a vulnerable customer. Do card providers have to offer special help?

The FCA has told financial firms they have to take account of the particular needs of their vulnerable customers. For example, card providers should offer alternative routes of contact to make it easy for customers less able to use digital channels and get information. Firms should have specially trained staff to provide vulnerable customers with the help they need.

What other steps are credit card providers taking to help during the coronavirus pandemic?

This varies from company to company, so check with your provider to see what, if any additional help they’re offering.

Can I get a 0% balance transfer card so I don’t have to pay interest?

A 0% balance transfer credit card can help you pay off your outstanding credit card debt by moving the balance from one card (or multiple cards) where you might be paying interest, to a new one at a 0% interest rate for a set period of time. 

There may be a transfer fee to pay, and you’ll need to make sure you make at least the minimum repayments on time to avoid losing the interest-free terms. To avoid fees and interest charges, you’ll also need to repay your debt in full before the interest-free period ends.

You can use our credit card eligibility checker to see if you’re likely to be accepted for a card without it affecting your credit score.

Find out how balance transfer cards work

What’s happening about providers cancelling credit cards because of persistent debt?

Under FCA rules on persistent debt, providers are required to take a series of steps to help credit card customers who are making low repayments over a long period of time. 

These steps begin when, over a period of 18 months, a customer has paid more in interest and charges than they’ve repaid of the amount borrowed. If this is the case for you, your credit card provider must let you know and clearly explain the benefits of repaying more quickly. 

If you remain in persistent debt for a total of 36 months, your credit card provider has to get in touch again to set out ways that would enable you to repay your outstanding balance within a reasonable period. 

After this, if you don’t respond or you indicate you won’t make the increased payments, your cards will be suspended.

Because of COVID-19, credit card providers were told by the FCA that they didn’t have to suspend the credit cards of customers in persistent debt who hadn’t responded to communications received until 1 October 2020. If you weren’t in touch with your card provider before that, you may find that your card is now suspended and you can no longer use it.

If you’re in this situation, the best thing to do is get in touch with your card provider to discuss your options.

If you’ve had a letter about your persistent credit card debt, then get in touch with the debt charity StepChange, who’ll be able to give you advice.

Can I claim for cancelled bookings made using my credit card?

You may be able to claim for cancelled bookings made using your card, depending on how much you spent and the circumstances around the cancellation.

Under Section 75 of the Consumer Credit Act, if you use your credit card to make a purchase of between £100 and £30,000, your purchases are protected if the supplier breaches their contract or misrepresents the goods you’ve bought. But there’s no automatic legal right to receive money back - it will depend on all the relevant facts, including the:

  • supplier’s terms and conditions
  • Mastercard or Visa scheme rules
  • approach from the card issuer.

So if your supplier cancels, doesn’t deliver your goods or stops trading, you can make a claim with your credit card company. They’ll tell you what evidence you need to support your claim so they can check if it’s eligible or not. It doesn’t matter if you only paid for part of the total with your credit card, for example, the deposit. You can still claim, as long as the total purchase price for a single item is between £100 and £30,000.

When it comes to cancelled flights, package holidays or events, it’s a good idea to start by checking your supplier’s terms and conditions relating to cancellations, refunds or re-booking.

Try to do this before talking to your credit card company about claiming under Section 75 - it might help you get a resolution more quickly if you can give your card company the information they need.

If your travel bookings aren’t cancelled, check the Foreign & Commonwealth Office’s (FCO) current travel restrictions for guidance and advice. These are changing as the coronavirus situation develops.

If your travel dates extend beyond the dates mentioned in the FCO’s advice, you may have to wait until the restrictions or bans are extended to cover the relevant dates before being able to make a Section 75 claim. 

If your holiday company, airline or other supplier offers you the ability to re-book or offers you a credit voucher, you won’t be able to claim under Section 75, unless this is in breach of the supplier’s terms and conditions.

Some retailers, airlines and card providers are taking a long time to deal with refund issues due to the number of claims received. Check your provider’s website to see the advice they’re offering if your claim is stuck in a queue.

Should I apply for a personal loan or credit card during the coronavirus crisis?

If your income is affected because of coronavirus, you could be eligible for benefits or wage support.

So make sure you’re claiming everything you’re entitled to and check whether you have any insurance policies that cover loss of income. If you have savings, most banks will allow penalty-free access to fixed-rate savings accounts due to the current circumstances.

You might also want to consider a debt consolidation loan, which can let you turn multiple debt payments – credit cards, store cards, overdrafts or loans – into one potentially lower monthly payment. Be aware that this type of loan may come with fees and charges, and that you may also have to pay fees for settling existing loans. You may also end up paying more interest over the term of the loan.

If you need help with debt, you can get free confidential advice. Find help using the Money Advice Service’s debt advice tool. 

Debt during COVID-19

COVID-19 changed all of our lives. And while things like the wearing of face masks and the closing of our favourite restaurants were obvious, behind the scenes people were dealing with a completely new financial reality.

Those struggling with financial low financial resilience (which means they’re over-indebted, have low savings or erratic earnings) has risen from 10.7m before the pandemic, to a whopping 14.2m – representing over a quarter of the UK population.

The survey, which was conducted by the Financial Conduct Authority with a sample size of 22,000 people, also found that as many as 9 million people were forced to increase their borrowing last year in order to stay afloat.

The report found that people were willing to go to extreme measures to ensure they and their family got by. Those included:

  • 17.5m people willing to cut back on essentials
  • 5.6m turning to a food bank for support
  • 8.1m expected to take on more debt to survive

When it comes to the level of debt itself, financial charity StepChange found that a grand total of £6.1bn was owed in arrears since the outbreak of the pandemic.

The numbers don’t make for good reading at home. Since the beginning of the pandemic, as many as 2.8 million people have fallen into arrears, with the three most common forms of debt being:

  1. Utilities – 1.2m people
  2. Council tax – 820k people
  3. Rent 590k people

17% of adults now worry about paying for essential items like clothes or healthy food, with as many as 4.6m people believed to have been negatively affected in some ways since the beginning of the pandemic.

Perhaps most worryingly of all, as much as £1,729 billion was owed by UK citizens in debt at the end of March 2021. That was a rise of £27.1 billion from the same point of 2020. That averages out at an extra £511 per person.

And it isn’t just the everyday person who’s been affected by the pandemic. The UK Government is expected to need to borrow as much as £355bn for the 2020-21 financial year, before falling down to £234bn the next. That initial number is higher than borrowing has ever been outside of wartime.

But this is far from a localised problem in the UK alone. Alarmingly, it is estimated that on a global scale the world has racked up debts of £13.8 trillion directly as a result of the pandemic. Only the future will reveal how this is set to impact global society.

How the coronavirus impacted household finances

While debt might be on the rise, household finances have been able to remain largely stable – thanks in no small part to the lack of spending on non-essential items over periods of lockdown. Figures discovered by the House of Commons Library show that household savings as a proportion of overall household income actually rose – from 9.6% in Q1 of 2019, to 29.1% in the same quarter of 2020.

That said, it wasn’t as pretty a picture for employment rates, with figures showing a massive drop-off between March and May of 2020. Job rates would drop by 3% in April of 2020 and a further 2% in May of the same year – a major difference from the continued rise in employment across the country prior to the first lockdown.

Average monthly income would also take a hit, with the numbers showing:

  • £2,400 – January 2020
  • £2,430 – February 2020
  • £2,220 – March 2020
  • £2,290 – April 2020
  • £2,290 – May 2020

(all figures rounded to nearest tens of pounds)

Looking at the IFS stats again, it’s clear this sudden dip in income had an impact on paying the bills. Figures showed 6 million adults had fallen behind on at least one of their regular payments, with the numbers showing:

  • 3.4m – Mobile or broadband bills
  • 3m – Water bills
  • 2.8m – Energy bills
  • 2.8m – Council tax
  • 1.2m – Rent

Sadly, some types of people were more financially affected by COVID-19 than others. Here are some of the key talking points for those that were hit hardest by the pandemic.

  • Renters – 700,000 people were in rent arrears.
  • Minority groups – 45% of black and minority ethnic groups were unable to pay an emergency cost, as opposed to 26% of white groups.
  • Parents and carers – 22.2% more parents had to borrow credit when compared with the start of the pandemic.
  • Disabled people – 3.1m disabled people fell behind on bills during coronavirus.
  • Young people – 19% of those aged 25-34 said they were likely to seek debt advice.

While everyone was affected in some way, it was these groups who found their household financial situation the most heavily impacted.

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