A number of new measures have been introduced to protect consumers when borrowing money through credit cards are set to come into force.
These credit changes have been agreed between the finance industry and the UK Government. They have been set to give credit card borrowers more control over their borrowing, and those at more risk of getting into financial difficulties will be given far more protection.
The key changes implemented are:
1 . Repayments made by credit card holders will be used to reduce their most expensive debt first. This will essentially end the current practice that ensures debt that is only earning low or zero interest is repaid before debt on which interest is charged at higher rates.
2. Borrowers will be given greater control over their credit limit, enabling them to opt-out of receiving credit limit increases. In addition to this they will also be able to reduce their limit at anytime.
3. When credit Card lenders who decide to increase interest rates borrowers will be given more time in which to opt to remain on their existing interest rate, but stop using their cards to make new purchases.
4. Minimum repayments for people who open new accounts will be set at a level that covers all interest, fees and charges over the course of the month, as well as 1% of the outstanding balance, to help borrowers reduce their debt at a faster rate.
5. People at risk of getting into financial problems will be given more advice and guidance on the consequences of re-paying too little each month. They will also receive an annual statement that shows the cost of their borrowing.
Further measures are being looked into to help protect borrowers, including a cap on the interest rates that can be charged on credit cards.