An increasing number of us are routinely paying for goods with plastic. Using credit and debit cards has undeniable benefits: It allows us to track and manage our spending, it provides automatic proof of purchase, it enables us to collect rewards or points, and perhaps most significantly it gives us some protection against dodgy traders or misuse. However, while we are becoming increasingly aware of consumer rights in relation to credit, many of us forget that card providers still reserve the right to allocate repayments as they like, make changes to your agreement, impose penalties and demand immediate repayment. And this can often come as a big surprise to many people.
Most people at some point have had to pay a charge for late payment or for exceeding the credit limit. While this used to be as high as £25, the OFT have recently capped it at £12, saying it was unfair and disproportionate. However, this is not to say that £12 is fair either. The OFT have stated that any fee must reflect any costs incurred on the credit provider’s behalf – if you are only slightly late or only slightly over the limit and you feel it is unjust, phone the card provider and politely request the fee be scrapped. In practice however, it is better to avoid these situations by setting up a direct debit. Late payment or exceeding your credit limit more than once can affect your credit rating, and may result in the credit provider increasing your APR with very little notice (read on for more on this).
Reclaiming bank charges – the latest
In February of this year, the banks lost their appeal in the high court, leaving the OFT free to investigate whether their bank charges were unfair. The results of the investigation are expected later in the year. While the reclaiming process is still on hold, a positive ruling by the OFT will clear the backlog and make it quicker and easier to file a claim in the future.
In addition to penalties for late payments, unpaid direct debits and exceeding your credit limit, there are also fees levied for cash advances, balance transfers, money transfers, handling cheques, foreign currency fees and duplicate statements. Although these fees are roughly similar between all card providers, it’s always worth having a quick read of the Ts and Cs to find out what they are. Another thing to be aware of is whether there is an annual fee for your card. In practice however, only the more exclusive cards tend to have annual fees.
By law, any application for credit card must include information in relation to the interest payable. For most cards this is usually a monthly rate of around 1.5% and an annual rate of around 20%, but there will be a lot of variation. In addition, the rate will differ according to whether it is for purchases, balance transfers and cash advances. Some cards will offer you an introductory rate of 0% for a fixed amount of time, it may include purchases as well as balance transfers, but it will never include cash advances. In fact, getting cash out on your credit card is probably the worst thing you can do – not only will you have to pay a handling fee, you will also have a higher rate of interest AND (worst of all) you will pay this higher rate from the moment you take the cash out, to the time the entire balance is paid off. Not the amount of cash you took out – the ENTIRE balance. This is due to the way card providers allocate repayments to your card. Read on to find out more.
- Consumer Credit Act
- Credit Agreements Explained
- Debt Management Companies
- Debt Collection Agencies
- Data Protection Act
- Accessing your Credit File