UK government has made changes in credit card rules to benefit customers who are struggling to manage their finance. The credit card industry has agreed upon a ‘breathing space’ concept to help their customers. Risk based re-pricing rules have also been changed.
What does ‘breathing space’ mean to you?
As a customer if you are in discussion with a debt adviser on a debt repayment plan, you should notify your credit card company(s). The credit card company will then stop all its collection attempts for the next 30 days. A further extension of 30 days can be granted if discussion continues with a considerable progress. This ‘breathing space’ may put off some pressure.
How will the changes in ‘risk based re-pricing’ help you?
As a customer, you are entitled to a benefit of information according to the new regulations. If the credit card company makes any changes to your credit card due to risk re-pricing, then they will have to:
- Give you a minimum 30 days notice before increasing your APR.
- Give you an option to close your credit card account and repay the outstanding balance at the existing interest rate within a scheduled time.
- Not increase the APR of your card for the first twelve months or more than once in every six months after that.
- Explain the reasons to change your APR.
- Offer an alternative product or solution at a lower interest rate.
With these new changes, you stand a better chance to manage your credit card and credit card debts. These are good news but you must take the initiative to stay out of excessive credit card debts as long as possible. Here are 10 things that you must not do to stay out of credit card debt related problems.
Don’t Do 1. Forget to get your credit report.
Make it a point to get your credit report each year from the primary credit bureaus. This helps to keep you updated with your credit status and gives you ample opportunity to check if your transactional details are accurate and up-to-date.
Don’t Do 2. Co-sign with someone with a credit risk.
If you co-sign with someone who is a bad credit risk, e.g. your spouse, you must be aware that you are responsible for the account if the other person involved fails to repay a loan.
Don’t Do 3. Deny giving same individual information for identification in every loan application.
It is a good practice to give same identification information e.g. name, telephone number, social security number etc. each time you apply for a credit. In this way you can ensure that you don’t land up getting duplicate files. Tips: If you use a middle name, either use it always or never use it.
Don’t Do 4. Neglect to form your own credit information
Sometimes it may happen that you don’t have a credit report by your name. After marriage you get to use your spouse’s account as an authorized user. In this scenario if you ever plan to file a divorce, then you might lose all the benefits. So, it is very essential to get credit on your own name right from the beginning.
Don’t Do 5. Load your bag with too many credit cards
Often credit card gives you a false sense of achievement, but in reality you achieve nothing but debt. Ideally you should use credit cards only in emergency. It is always better to use cash to cover regular expenditure. You may carry as few cards as possible to track your expenditures and avoid running into a bad debt.
Don’t Do 6. Repay minimal amounts
Are you happy to repay the smallest amount possible each month against your loan? The only person who is benefiting form this is your creditor. The lesser you pay, the longer you take, thus incurring high interest amount on your actual loan money. Ultimately you land up paying a lot more.
Don’t Do 7. You think it is not so important to fix errors on your credit report.
However slight the error may look, it is important to fix it up. Check all incorrect balances and closed account printed as open or vice-versa. This might lead to a lot of discrepancies in the long run. Keep your credit report error-free to live a trouble-free life.
Don’t Do 8. Names are matched in your family
If your family has members with same names with different titles like, Jr, Sr or post-fixes like I, II and III, then make sure that your credit histories are not mingled together. If there is any discrepancy, report it to the concerned department immediately. Beware of anyone trying to misuse your credit.
Don’t Do 9. You think that late payments don’t reflect on your credit report.
Are you aware that if you are 30 days late in repaying, your creditor is free to report the delinquency to a credit bureau! This is turn affects you in long run to get a good interest rate or future credit. So, keep a track of payment due dates and follow a ‘spend-less, pay-early’ method.
Don’t Do 10. Last but not the least, failing to pay at all
However small the balance is, not paying it affects your credit report throughout your life. So don’t keep aside a card just because you don’t use it anymore. Pay the dues to every penny.
If you follow these rules it will definitely help you to properly manage your credit card debts and live a free life. Do you have any suggestion on credit card debt management? Please write a comment and help others.
An motivating and absorbing article thanks. Getting out of debt is a tough thing to do and I should know. I have been in money owing situation for nearly four years and have only now started to claw my method out of it with a credit counselling service. I highly recommend them as they will help you speak using your creditors and negotiate your liability down to a managable level. Well worth the effort although specifically make in no doubt you go with a {reputable|trustworthy|respectable