Lenders slash 0% interest terms
Borrowers face paying more to make minimum credit card repayments as several high street banks changed their deals over the last week, according to Moneyfacts.
Halifax, Lloyds Bank and Bank of Scotland have increased the minimum monthly repayments on all credit cards from the higher of 1% of your total debt, or £5, to 2.5%, or £5.
MBNA has also increased the minimum repayments on its credit cards from the higher of 1%, or £25, to 2.5%, or £25.
These changes will see the minimum repayments for some borrowers more than double, Moneyfacts says.
People who only pay off the interest on their credit cards could take 26 years on average to clear their debt, research shows.
So an increase in the minimum repayment rate could help some borrowers clear their debt faster.
Eleanor Williams, finance expert at Moneyfacts says: “One benefit to consumers regarding an increase to the minimum credit card repayment would be that those who habitually just pay their minimum payment would likely reduce the time it takes them to repay their total debt.”
For many borrowers who are struggling financially due to the coronavirus pandemic, this increase could add further strain.
Williams continues: “Those who may be experiencing any concerns around disruption to their income and their ability to meet payments would do well to get in touch with their provider early to discuss what options may be available to assist them.
“Citizens Advice Bureau and the Money Advisory Service could be useful resources for those who require support.”
Banks withdraw credit products
A number of high street lenders have reduced the interest-free terms on their credit cards or withdrawn products altogether.
The Sainsbury’s Bank Dual Offer Credit Card previously offered a market-leading 0% interest term of 27 months. This has now been reduced to 26 months.
The bank also reduced the interest-free period on its Balance Transfer Credit Card from 29 months to 28 months, while also increasing the balance transfer fee from 2.74% to 3%.
Similarly, Tesco Bank reduced the interest-free term on its Clubcard Credit Card from 28 months to 26 months.
It also removed the three-month 0% interest purchase term on the card as well as reducing the 0% money transfer term from 28 months to 12 months.
Tesco Bank has also temporarily withdrawn the following products:
- 12 Month All Round Clubcard Credit Card
- 15 Month All Round Clubcard Credit Card
- Clubcard Credit Card
Some lenders have also started to cut the amount they will lend customers.
Bank of Scotland, Halifax and Lloyds Bank have reduced their maximum personal loan limits from £50,000 to £35,000.
In addition to this, Admiral temporarily withdrew its personal loan product from the market.
Help for borrowers affected by coronavirus
Those struggling financially due to the coronavirus crisis will get more support under new plans from the Financial Conduct Authority (FCA).
The regulator is urging banks to put several emergency measures into place including a three-month freeze on credit card and store card debt.
A short consultation is being held on these proposals this week and, if approved, banks will have to implement them by 9 April.
Some banks have already started to take action such as waiving overdraft fees to support customers facing financial difficulty.
If you are in financial difficulty, get in touch with your bank as soon as possible to see what support they can give you.
Charities such as Step Change and the National Debt Advice Line can help you manage your debts as well.