Many people will be facing up to credit card debt in the new year, often because of heavy pre-Christmas spending, but there is some good news for acco…
Many people will be facing up to credit card debt in the new year, often because of heavy pre-Christmas spending, but there is some good news for account holders, it has been noted.
The UK Cards Association has explained a range of new measures it has agreed with the government, which will be coming into effect in 2011.
From January 1st, new rules on interest charges will mean that the most expensive debt in terms of the rate being paid will be charged first, whereas up to now it has tended to be the least expensive.
This will mean many people will end up paying less in interest overall.
And from March, minimum payments will be set at a level that will ensure the balance falls even if this is all that is paid in any given month.
Other measures include better communication about changes to accounts, such as offers to increase a credit limit and any forthcoming alterations to interest rates.
Noting the body has voluntarily agreed to such measures, chair of the UK Cards Association Melanie Johnson said: “The industry continues to work and consult with the consumer bodies and debt advice agencies to ensure that it can best protect the vulnerable or those in financial difficulty.”
People with credit card debt may wish to focus on paying it off in the near future despite the new changes to such accounts.
Commenting on the possibility of a rate rise soon, head of consumer finance at lovemoney.com Ed Bowsher advised consumers to concentrate on paying off what they owe rather than increasing savings while the base rate is so low.
He explained that the latter measure will do little to earn extra cash, while reducing debt will mean bills rise by less when rates do go up.
By Joe White