CREDIT card companies have been slammed for charging fees – often more than once – to customers who are already in financial difficulty.
The city watchdog says some firms applied charges when customers missed multiple payments or made late payments, which should have been a sign they were struggling.
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In other cases, these fees were charged more than once in a month.
For example, some customers who didn’t have enough cash in their accounts to cover a direct debit payment to their credit card provider would be hit with a returned payment fee.
These customers would also be slammed with a late payment fee because they missed their minimum repayment.
And this late payment fee in turn could see customers going over their credit limit, which would then result in a fee for this as well.
How to cut the cost of your debt
IF you’re owe a lot of money, it can be really frightening. Follow these tips to take action and start dealing with your debts.
- Don’t bury your head in the sand – Check your bank balance at least once a week. Understanding how you spend is the first step towards managing your finances.
- Start budgeting – write down your weekly income then deduct essential bills such as food, energy, commuting and council tax.
Whatever is leftover is your budget for the month. Set aside a chunk to pay down your debts and work out what you’ll spend and save. - Cut costs – look at ways you can cut your expenditure such as switching energy provider or swapping from named brands to supermarket essential options.
- Overpay your debts – The more you pay off the less interest you’ll pay over time. This is espeically through for credit card debts. With loans or mortgages check first as there may be a mximum you can overpay.
- Prioritise – Things like rent or mortgages, council tax and energy bills may have serious consequences if you miss the payments.If you can afford to overpay, make sure you target the highest interest rates first.
- Get advice – If you can’t afford what you owe – don’t panic, there’s plenty of free help available!
Contact debt charity Stepchange, Citizens Advice or the National Debt helpline where experts can talk you through your options.
You can also get help to prioritise debts and negotiate with creditors to set up affordable payment plans.
Jonathan Davidson, executive director of supervision – retail and authorisations at the Financial Conduct Authority (FCA) said: “Our research showed that a large number customers were often missing payments but continuing to be charged fees.
“In some cases, customers ended up being charged multiple fees as a result of each missed payment.
“This may suggest that firms are not adequately identifying and dealing appropriately with signs of actual or possible financial difficulties.”
Despite this, the FCA has stopped short of announcing a redress scheme or punishment for firms – and it hasn’t named the providers involved.
But it has said card companies need to clean up their practices.
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It’s warned firms to review charges and to ensure they better communicate with customers.
The FCA says these actions will save consumers a combined £80million although it wouldn’t tell us how this figure has been calculated or how many people will benefit.
If you think you’ve been hit with unfair fees at a time when you were financially struggling or you’ve been hit with multiple charges when it was clear you couldn’t afford the initial fee, it’s worth complaining to your provider.
Explain what fees you were charged and why you feel they were unfairly charged.
If you don’t get a response from your card provider within eight weeks or you’re unhappy with the response you do get, you can take your case to the free Financial Ombudsman Service.
Mr Davidson added: “It is unacceptable for firms to ignore signs of customers struggling financially and continue to charge them fees for missed payments which they likely can’t afford.”
How to do a balance transfer
APPLYING for a transfer is just like taking out a new credit card.
Use a comparison site to find to see what deals would be best for you and follow the provider’s application process.
Remember that you’ll be credit checked and only those with the very best credit history will be offered the headline 0 per cent period.
MoneySavingExpert has an eligibility calculator you can use to see what cards you are likely to be accepted for before you apply.
Different providers will let you transfer different amounts – Barclaycard for example will let you transfer a minimum of £100 up to a maximum of 90 per cent of your credit limit.
Typically a transfer will only take a couple of days but sometimes your new provider might need to make a few additional checks which can make the process a little longer.
We’ve rounded-up the best 0 per cent interest-free credit cards for spending and purchases.
But be warned that credit card providers are slashing 0 per cent promotions on balance transfer cards by up to a third.
Plus, here’s how to pay off your credit card and slash your debts.
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