The Daily Telegraph

Text alerts to halt rip-offs on zero per cent credit card deals

- By Katie Morley CONSUMER AFFAIRS EDITOR

NEARLY 5 million credit card holders will receive texts and emails to tell them when deals are coming to end under a plan by City watchdogs to curb rip-off lending.

New Financial Conduct Authority (FCA) rules will force providers to notify customers two or three weeks before higher interest rates are applied to their credit card balance.

The system now being finalised will give borrowers time to search for a better deal elsewhere and move their debts without being forced to pay the high charges.

At present banks frequently lure customers with 0 per cent offers, but provide no warning of when the deal ends.

This has led to around half of card holders failing to clear balances in time, according to price comparison site uSwitch.

Around 2.4 million holders of the 4.8 million “0 per cent balance-transfer” cards in circulatio­n will become exposed to high fees. For example, Virgin’s 41 Month Balance Transfer Credit Card offers 41 months’ lending at 0 per cent but charges interest at 20.9 per cent a year thereafter, plus an extra 4 per cent to transfer the balance to another provider.

The average UK credit card debt is £1,100, meaning it can take months or even years to clear debts – especially when high interest and fees are added. The average extra fee for customers who fail to realise a deal has ended is £267, estimates uSwitch.

Commenting on the text alert plan Hannah Maundrell, a money expert at money.co.uk, said: “I hope this is the beginning of the end of people falling for the temptation of a 0 per cent deal only to roll onto sky-high interest rates, but I’m sceptical.

“If it does have the intended effect, the worry is credit card companies will stop offering such competitiv­e deals as they’re not making as much money at the tail end.”

The FCA will publish further informatio­n on the proposed rules and voluntary remedies later in the year.

Christophe­r Woolard, FCA director of strategy and competitio­n, said: “We will continue to work closely with consumer groups and industry and to deliver changes to help consumers gain more control over their finances.”

Richard Koch, head of policy at the UK Cards Associatio­n, which represents card providers, said the industry had developed a package of voluntary measures to help those “who do not use a credit card in a way which is in their best interest”.

The FCA said that 40 per cent of customers still had debts three months after introducto­ry deals had ended, while nearly a third (29 per cent) were paying off their balance six months later.

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