The Impact of Coronavirus on Credit Cards & How to Get Help


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By Cai Bradley

Updated on Tuesday 24 March 2020


Coronavirus infographic showing financial decline

In this guide:

Coronavirus and credit card interest rates

What support is available?

Applying for credit during the Covid-19 outbreak

Martin Lewis’ credit card advice

Credit card repayment holidays

Help with ‘persistent debt’

Financial tips to do RIGHT NOW

Whether you’re worried about being off-work and relying on Statutory Sick Pay (SSP), your employer letting people go, or you’re self-employed and concerned about your business, we’re all living through an unprecedented and distressful time at the minute.

A large proportion of UK residents and businesses (big and small) are facing financial instability, and while our health is our primary concern, our financial wellbeing is also crucial.

In this guide, we explain the current situation concerning credit cards and the support on offer to those who are struggling, and offer some advice in terms of things that you can do right now to help you get through this extraordinary crisis.

Note: The UK’s situation is ever-changing at the moment and, while the information below is accurate at the time of writing, things will change. We will update this article as often as possible to ensure you stay on top of your finances during the Covid-19 pandemic.

How will credit card rates be affected by Coronavirus?

Coronavirus has forced significant financial changes, including the emergency interest rate cuts recently announced by the Bank of England (BoE). 

Credit card rates have been largely unaffected by the UK bank rate change, primarily due to the fact that credit card interest rates were already so much higher than the base rate.

But with Coronavirus impacting the economy through business closures and certain restrictions currently in place, it comes as no surprise that many households are struggling to cover their debts, and some could potentially fall into new debt due to a lack of work.

Thankfully, there is some forbearance being offered in the form of emergency credit limit increases, repayment holidays and waived fees (depending on the bank or credit card firm).

Read more: The Best Types of Credit Cards Available

What help is being offered by banks to credit card customers?

Most credit card lenders and banks are offering some sort of financial assistance during the coronavirus pandemic, but how much help you get depends on which firm you have borrowed from.

Bank

Are missed payment fees being waived?

Are credit limit increases on offer?

Are repayment holidays available?

Barclays

No

Yes

No

First Direct

No

Yes

Yes

Halifax

Yes

No

Yes

HSBC

Yes

Yes

Yes

Lloyds

Yes

No

Yes

Nationwide

No

Yes

No

NatWest

No

Yes

No

RBS

Yes

Yes (temporarily)

No


The only lender offering all three forms of support (missed payment fees being waived, credit limit increases and repayment holidays) at the time of writing is HSBC.

Of course, each lender will be reviewing the situation constantly and it’s almost certain that more help will become available as time goes on.

Applying for credit during the Coronavirus crisis

As credit card interest rates have not been too badly impacted by the Covid-19 pandemic, taking out a credit card shouldn’t hurt, as long as you borrow sensibly.

Borrowing should, according to the Money Advice Service, be used as a last resort if you don’t have sufficient savings in place and only if you are struggling financially.

If you’ve got a good credit score, you should be able to borrow as you usually would, but make sure that you look at your options and choose the right type of credit for your needs.

Find out your credit rating today using Check My File – one of the most reliable ways of checking your full report from all of the UK’s major credit reference agencies.

When you’re looking to borrow, be sure to:

  • Shop around and compare deals available
  • Check the interest rate and Annual Percentage Rate (APR)
  • Evaluate your situation and how much you can afford to repay
  • Find out if the lender will penalise you for missed or late payments
  • Ask the lenders what help they are offering during the Covid-19 pandemic

Martin Lewis’ credit card advice during the coronavirus pandemic

MoneySavingExpert, Martin Lewis, has advised that those who are in need of 0% credit apply as soon as possible, as there is growing concern that credit card firms are going to begin tightening the acceptance criteria.

While Martin Lewis is usually against borrowing unless it is planned and budgeted, he has stated that it is understandable that people may simply need access to a cheap borrowing facility just in case their financial situation worsens.

He noted that those who do need to borrow should use 0% credit cards, but to only use them in a dire emergency.

Note: If you’re struggling to keep up with your debt repayments and the help offered by your lender isn’t sufficient, be sure to seek debt-counselling help from one of the many not-for-profit organisations in the UK.

Balance transfers: A solution to credit card debts?

One potential solution to credit card debt is using a balance transfer credit card, which could help you save a significant amount in interest.

With a balance transfer credit card, you are able to move your card debt to one with 0% interest for as long as 29 months.

As a result, you will become debt-free in less time because your repayments will be working to reduce your debt, rather than pay off interest.

Learn more: Balance Transfer Credit Cards Explained

Credit card payment holidays

Individuals or households who are struggling to make credit card payments as a result of financial issues related to Coronavirus may now be offered repayment holidays of up to three months.

Currently, most creditors offer at least 30 days of “breathing space” as long as you are able to show that you are trying to get your debts in order and clear them.

From 2021, new government plans mean that a 60-day breathing space period of repayment holidays will see interest frozen for people with problem debt and creditors unable to make enforcement actions.

Until then, some providers are offering their customers payment holidays of up to three months to help them get through the Coronavirus pandemic as smoothly as possible.

Read more: What is a Debt Relief Order?

The help offered by the FCA to people in ‘persistent debt’

What is persistent debt? Someone is considered as being in persistent debt when they consistently pay more in interest and fees than they do in repayments of their borrowing, usually over a course of 18 months.

The Financial Conduct Authority (FCA) recently announced that it has suspended credit card persistent debt rules due to the impact of Coronavirus on the finances of households around the UK.

The credit card persistent debt rules previously gave banks the right to suspend any credit cards held by their customers who were in ‘persistent debt’ and not responding to letters and other forms of communication regarding their debt, but this new change means that cardholders have until the 1st of October 2020 to respond to any communications from their bank.

In short, the new guidelines mean that lending firms are not able to suspend customers’ credit card accounts due to persistent debt, regardless of whether they have already been sent communication about the issue or not.

The decision was made to help those who were struggling to pay their minimum credit card repayments before the Covid-19 outbreak.

Read more: How to Manage Your Debt

Financial tips to do NOW

These are troubling times, but there are things you can do right now to help ease the financial strain you feel, including:

  • Check your rights and entitlements in terms of what you may be able to claim.
  • Make an emergency budget
  • Check your insurance policies that could cover your mortgage payments or lost income (payment protection insurance, mortgage payment protection insurance, and accident, sickness and unemployment insurance).
  • Use your savings – you may have access to fixed term savings due to new rules.
  • Contact your creditors about the support they have in place.

We will keep updating this article as often as required, but be sure to see our related guides for more financial advice:


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