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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
9
minute read
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Posted 19 OCTOBER 2020

Please note: The information in this article was correct at the time of publication on 19 October 2020 but, because of the impact of COVID-19, things are changing rapidly. We aim to keep this page updated, but please check with your credit 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.  

Under measures introduced by the Financial Conduct Authority (FCA) at the start of October 2020, your credit card provider should offer you tailored support that reflects your personal circumstances, to help you deal with financial issues you’re facing. 

If you haven’t yet been given a payment freeze holiday and are experiencing temporary financial difficulty due to coronavirus, you can request one up until 31 October 2020.  
If you’ve already had a payment holiday, 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 living situation. 

The FCA has told financial firms they need to be flexible and offer a range of both short- and long-term solutions to help customers facing financial difficulties. 

When getting in touch 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, depending on your circumstances, either another payment holiday or the option to reduce payments to a level you can afford.  
  
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.

For anyone who had a payment holiday earlier in the year, your credit file won’t be affected for the period of the repayment freeze. But if you now need further support, either at the end of payment holidays, or for the first time, 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.

What has changed? Are things different now from the start of the pandemic?

Early on in the pandemic, from 9 April you were able to ask your credit card company for a freeze on credit card repayments for three months because you were experiencing a change in financial circumstances due to coronavirus. This option was later extended.

However, new rules were introduced in October 2020. Any payment holiday will now be included in your credit score, unlike the original payment holiday and extension offered.
  
And instead of the blanket payment holiday approach, providers will now have to offer you tailored support. The help available will depend on your financial circumstances and what help you had previously been offered.  
 
It could include a payment holiday, but there may be alternatives like a freeze on interest or lower payments.

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

During the lockdown phase of the pandemic, some providers scrapped fees for late payments and cash advance fees for all customers automatically. Others offered an increase in the amounts that could be borrowed and the possibility of refunding fees on cash advances in emergencies (but only if you asked). However, as things have changed, so have some of these options. Check with your provider to see how they’re offering to help.

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, firms 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. See StepChange’s advice on persistent debt

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. 

So if your supplier cancels, doesn’t deliver your goods or stops trading, you can make a claim to your credit card company. 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 card providers are taking a long time to deal with 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.

If you need to borrow for the longer term, a loan might be more affordable than a credit card.

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.

The outbreak of coronavirus (COVID-19) means that some loan providers have restricted the loans they’re offering customers, or they’ve withdrawn some loans from comparison sites and the wider market.

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

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