Act now before you’re all out of credit

Persistent debtors risk a crisis with new rules in march

THERE’S only a week to Christmas Day and if you are heading into panic mode to get your shopping list sorted – stop.

Don’t be tempted to hit the plastic and build up expensive debt, thinking you will sort it out in the New Year.

Those with existing stubborn debt on credit cards, and who are only paying minimum repayments, need to be especially wary of adding to their balances.

They could end up having cards suspended or be put on to debt repayment plans early next year as new rules from the Financial Conduct Authority kick up a notch and things get serious.

These rules were brought in to tackle the issue of “persistent debt” – that means people who are paying more in fees and charges to card providers than they are towards clearing their balance.

Credit card firms have had to take a series of steps over 36 months to contact customers who consistently make low or minimum monthly payments.

March spells the 36-month deadline – D-Day for those paying over the odds in interest – when card firms are forced to do something to help.

StepChange Debt charity has concerns about the quality of the letters going out to those in debt.

It’s worried that they may not be spelling out the seriousness of the situation, nor doing the job they are meant to do of encouraging people to take action – and quickly.

The charity says more than three million people across the UK are trapped in persistent debt and many may not really be aware of what is coming.

Once those in persistent debt hit the 36-month threshold, they could be stopped from spending on their card, huge numbers of cards will be cancelled, and many people will be left with little option but to make higher repayments or to get expert advice from a debt adviser.

Sue Anderson, from StepChange, said: “The social pressure to spend at Christmas is already bad enough but if you’re running stubborn balances on your credit card that you just can’t seem to shift, think twice before adding more.

“From early next year, anyone who’s paid more in fees and charges than they’ve paid off their card for 36 months will be regarded as being in ‘persistent debt’ and that will trigger action from lenders.

“New rules mean lenders should make an effort to help you set up an affordable repayment plan. But don’t wait to get help, talk to your card provider, or a reputable debt charity.”

Here are our tips on helping yourself:

‘‘Anyone who has paid more in fees than they’ve paid off a balance will face action