NEARLY 30 million credit card users in Great Britain and Northern Ireland are to get significantly increased rights, including a guarantee that monthly minimum payments are used to clear the most expensive debt first, under a deal brokered between the British government and credit card companies announced yesterday. The deal could save customers up to £500 million (€550 million) a year.
Currently, credit card companies in the UK use monthly repayments to clear the cheapest debt first, such as zero per cent balance transfers from other cards, before using it to reduce older debt on the card, or cash withdrawals. The monthly minimum payment, however, will now have to be used to clear 1 per cent of the outstanding principal. Credit card companies will also be barred from increasing a customer’s credit limit without the customer asking for such an increase – a measure that has been in place in the Republic of Ireland since 2007. Customers will also have 60 days, rather than the 30 days allowed now, to move to another credit card company if they are unhappy with a demand for higher interest rates.
The department for business, innovations and skills had initially intended to produce legislation that would have prevented credit card companies from increasing interest rates on debt already incurred; however, following a long campaign by the UK Cards Association, it has now decided not to do so.
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