How the government credit card and store card proposals affect you
Government gets tough on credit card providers
Do you already have a credit card or perhaps even more than one? Well if so, new rules are being drawn up by the government that may affect you.
In a swathe of wide-ranging measures announced by the government on 27 October, credit and store card companies may soon be forced to give
consumers a fairer deal.
Consumer minister, Kevin Brennan has raised concerns about how long it takes consumers to repay their credit and store card debts and says it can
take as much as 40 years to pay off a credit card if only the minimum repayment set by the provider is met.
He said: "It is up to consumers what they pay back but I think most consumers are quite shocked when you actually tell them that if you only pay the
minimum repayment it could take you up 40 years, much longer than a mortgage to pay off the debt on your credit card."
"While they [consumers] won't welcome the idea of paying a bit more back every month, I think that once people realise the facts and see what it
means in real terms to pay a little more back, many consumers will feel it is the right thing to do to."
So what are the proposals?
In summary, there are four main strains:
â—• Changing the rules that dictate the order in which debts on a credit card are paid off
â—• Raising the minimum monthly repayment level so people pay off their debt faster
â—• Banning the practice of increasing credit limits without prior consent
â—• Placing restrictions on increasing the interest rate on existing debt
Changing the order in which card debt is paid off
In its credit consultation paper, the government is proposing to change the rules that set the order in which debts built up on a credit card are paid off.
As it stands, most credit card companies make customers pay off the cheapest debt first. So, if you have withdrawn cash from your credit card - which
is usually charged at a higher rate than making a transaction on the card - then the card provider would