Credit card payment holidays and other relief is available to millions from tomorrow

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People struggling financially during the coronavirus pandemic can get extra help from tomorrow.

Credit card companies are allowing people some temporary relief on their bills, which could be a lifeline for some.

The new measures could help stop people falling into arrears due to a sudden change in their circumstances, according to city watchdog – the Financial Conduct Authority (FCA).

They will allow people to access a three month payment freeze on their loans and credit card debts, from tomorrow – April 9.

Anyone with an arranged overdraft on their main personal current account will also be able to ask for interest charges on the first £500 to be wiped.

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Credit scores will not be affected as customers will not be billed for the entire thee month period.

Water payments have also been paused for some customers, while mortgage holidays are being offered to support those who are temporarily out of employment.

Christopher Woolard, chief executive of the FCA, said: “Coronavirus has caused an unprecedented financial shock with far-reaching consequences for consumers in every corner of the UK. If confirmed, this package of measures we are proposing today will help provide affected consumers with the temporary financial support they need to help them weather the storm during this challenging time.”

We take a look at what’s changing below – to apply, you’ll need to contact your card issuer, bank or building society.

Overdrafts

New overdraft rules come in today with almost all banks planning 40% rates

People with an existing arranged overdraft will be able to ask for their interest charges to be wiped on up to £500 for the next three months.

To qualify for this, you will need to show that you have been financially impacted by COVID-19 – and the account will have to be your main current account.

Consumers who dip into unauthorised overdrafts will also benefit. Most banks have started charging a single interest rate of 39.9% for both arranged and unauthorised overdrafts as part of new rules meant to standardise charges this month.

But the FCA’s emergency measures said firms would have to make sure all customers were “no worse off” due to the changes, meaning some customers might revert to lower interest rates.

If you’re applying for a three month break, bear in mind that lenders will be allowed to charge interest after £500, though the FCA says these costs should remain “reasonable”.

Credit cards, store cards and catalogue credit

Customers facing financial challenges due to coronavirus will be able to ask for a three-month payment freeze or for the right to pay a nominal payment on their credit cards, store cards and catalogue credit for the duration of the outbreak.

Firms could consider other measures, such as reductions in monthly payments, if appropriate. Customer cards cannot be suspended during this period.

Personal loans

Customers with personal loans who face difficulties with their finances as a result of coronavirus will also be able to ask for a three-month freeze on their personal loans. You’ll need to make a request to your lender to apply for this.

Mortgage holidays for those at risk of defaulting

Britain’s biggest lenders have also been told to offer “payment holidays” to thousands of households affected by the coronavirus crisis.

This will be in the form of a mortgage break and will last for three months to help those who are out of work or have had to take a pay cut during the pandemic.

Banks and building societies are urging people not to go in branch to apply for these – but to instead apply online or over the phone instead. Many of them have forms online to get you started.

The three month term – which has been initiated for those at risk of debt during the pandemic – will mean payments are ‘paused’, with the 90-day period added to the end of your total mortgage term.

During this time, interest will still be accrued, but individual credit ratings will not be affected.

“Firms will help customers the best way for the individual, but an automatic payment holiday may not always be the most suitable approach and may not be required by all customers,” UK Finance said.

The banks have admitted the payment holidays are not a long-term solution but are designed only for a temporary income shortfall.

“This is not a solution where, because of a permanent reduction in income, a borrower is unable to afford anywhere near the full mortgage repayments and there is little prospect of an improvement in the situation in the foreseeable future,” said UK Finance.



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