You can get an interest-free overdraft of up to £500 and help with credit cards and loans from today
Millions of households hit by the coronavirus pandemic will be able to get temporary relief on credit card bills and loan payments due to new rules coming into force from today.
The Financial Conduct Authority (FCA) has announced several temporary measures to help people facing payment problems.
The measures will give struggling consumers a payment freeze on loans and credit cards for up to three months.
Customers who have an arranged overdraft on their main current account will pay no interest on the first £500 for this period.
With lenders introducing new overdraft prices this month, they will also have to make sure customers are not worse off compared to what they were previously charged.
Christopher Woolard, interim chief executive at the FCA, says: “The measures we’ve announced are designed to provide people affected with short-term financial support through what could be a very difficult time. The changes will provide support for consumers with credit cards, loans and overdrafts, facing temporary financial difficulties because of the pandemic.
“Customers should think carefully before making use of these measures and only do so if they need immediate help. Where they can still afford to make payments, they should continue to do so.”
HSBC, Lloyds, RBS, Barclays, Santander and Nationwide will introduce the changes from today, with other banks and building societies adopting the measures from 14 April.
Will a payment freeze affect your credit score?
The FCA says the credit scores of consumers using any of these temporary payment freeze measures will not be affected.
The UK’s three biggest credit checking agencies have said that anyone who takes a payment holiday will be protected.
Experian, Equifax and TransUnion have agreed an 'emergency payment freeze', meaning credit scores will not be affected during any payment holiday agreed with your bank or lender.
Getting an interest free overdraft
To get an interest free £500 overdraft you will have to prove to your bank that your finances have been hit by the coronavirus.
Customers without an overdraft on their main personal current account will be able to request this facility.
Getting a credit card or loan freeze
Customers in financial difficulty because of the coronavirus will able to ask for a three-month payment freeze or to pay a nominal payment on their credit cards, store cards and catalogue credit.
Firms can also reduce their customers' monthly payments, if appropriate. Customer cards cannot be suspended during this period.
Customers with personal loans that have problems with their finances as a result of the coronavirus can also ask their lender for a three-month freeze if needed.
You should only consider taking out a payment holiday if you really need it.
While payment holidays can help if you are having financial problems, you could actually end up paying back more in the long run.
This is because interest will continue to build for the duration of the freeze, so you should only ask for one if you can afford it.
Credit Card repayment freeze
Why are Banks going to be allowed to build up interest while the freeze is on. If you can't afford to pay now, it will be financially worse for the holder when the freeze ends.