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Credit cards and coronavirus

Credit cards and coronavirus

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

Anelda Knoesen
From the Money team
minute read
posted 16 JULY 2020

Please note: The information in this article was correct at the time of publication on 16 July 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?

Under measures introduced by the Financial Conduct Authority (FCA), you can request a freeze on credit card repayments for three months if you’re experiencing a change in financial circumstances because of coronavirus. This became possible from 9 April and, as the crisis has continued, the FCA has confirmed an extension on some of the help offered. 
If you haven’t yet had a payment freeze and are experiencing temporary financial difficulty, due to coronavirus, you can now request one up until 31 October 2020. 

The FCA warns that although the measures are designed to help you, they may result in increased costs in the longer term and interest will continue to build in the three-month period. So, think carefully before you enter into one of these arrangements and only do so if you need immediate, temporary financial help.   
If you can afford to make some repayments – even if it’s a smaller amount than usual – you should continue to do so.   
You need to contact your provider to request a payment freeze – don’t just stop making repayments. It might be easier to get in touch online rather than by phone. 
Your credit file won’t be affected for the period of the repayment freeze. 

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

You credit card company should contact you in good time as you come to the end of a first payment freeze to find out if you can afford to resume payments. If so, they should agree a plan with you on how the missed payments could be repaid. 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. 
Again, you need to agree a plan with the card provider. You shouldn’t continue not to make payments without making an arrangement.

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

Some providers are scrapping fees for late payments and cash advance fees for all customers automatically. Others are offering an increase on borrowing amounts and might refund fees on cash advances in an emergency (but only if you ask). 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.
Please be aware, though, that the outbreak of coronavirus (COVID-19) means that some credit card providers have restricted the numbers of cards they’re offering and have withdrawn some of them from comparison sites and the wider market. This means you might see fewer cards than normal if your compare with us.
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.

However, credit card providers have now been told by the FCA that, due to COVID-19, they don’t have to suspend the credit cards of customers in persistent debt who haven’t responded to communications they’ve received. Customers in this position now have until 1 October 2020 to respond.

If you’re in this situation, then the best thing to do is get in touch with your card provider to discuss your options, but you shouldn’t worry about your card being suspended for the moment.
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 a credit voucher, you won’t be able claim under Section 75, unless this is in breach of the supplier’s terms and conditions.

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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