New rules could see your credit card suspended if you only make minimum repayments - this is why

Credit card users could soon see their card suspended if they only make minimum repayments, due to new rules coming into force next month.

Wednesday, 8th January 2020, 12:41 pm

The new measures from the Financial Conduct Authority (FCA) aim to help millions of customers who are struggling to repay credit card debt.

Minimum repayments

In September 2018, credit card providers were forced to start notifying customers who had spent 18 months only making minimum repayments on their debts.

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The new rules aim to help customers struggling to repay debt (Photo: Shutterstock)
The new rules aim to help customers struggling to repay debt (Photo: Shutterstock)

After 18 months, if a customer is still continuing to only make minimum repayments, credit card providers must then prompt them to increase their repayments, by issuing at least three warning letters informing them that their card may be suspended if a change is not made.

If a customer is unable to make increased repayments at the end of 36 months, providers must then offer a way to help customers repay their debts over a reasonable period of time - usually between three to four years.

This could involve reducing, waiving or cancelling any interest, fees or charges, or transferring a credit card balance to a personal loan with lower interest.

Struggling with debts

Credit card providers must help customers who are unable to increase their repayments (Photo: Shutterstock)

With the new rules having been introduced on 1 September 2018, the 36 month period is now due to come to an end in February, meaning customers who are persistently in debt - and failed to increase their repayments - are at risk of having their accounts closed.

The move from the FCA comes in an effort to make credit card firms do more to help customers struggling with debts.

The regulations were designed for customers who were paying more in interest fees and charges than the original amount they borrowed.

Barclays, Lloyds and Royal Bank of Scotland are among the providers forced to contact customers who had been in debt for at least 18 months in September 2018 of the impending changes.

Only making minimum repayments on credit cards can lead to a lifetime of debt, with customers racking up an average of £3.50 in interest and charges for every £1 that they repay.

However, the FCA expects the changes to save consumers up to £1.3 billion per year, helping the estimated 5.6 million credit card customers in the UK who are struggling financially.