There can be millions of credit card users or customers at risk of having their account discontinued in the new year. This can happen as the city regulators developed certain affordability rules.
Credit card providers including the UK lenders like RoyalBank of Scotland, Lloyds, and Barclays were last year forced to recognize the consumers who had been in constant debt for at least 18 months.
In fact, they had to pursue and convince them in the next 18 months to boost up their payments.
Consumers who are not able to offer hiked payments might have their credit card discontinued from as early as February. It’s feared that these recently arrived rules will cause extensive cancellation of credit cards, which it is not the exact objective according to the regulators.
Therefore, let’s take a look at what happens to credit cards and the most convincing ways to pay your card balance.
Why will Lenders Suspend Credit Cards?
Controllers help or provide assistance to those who are in huge debts. These customers might have to invest more in fees, interest, and charges than the actual amount they are paying off their balances.
As per the FCA measures, there are almost three million people in the UK facing this situation but, can’t get rid of it. Those consumers are almost paying £2.50 in interest and an additional charge of £1 for each debt compensation.
Therefore, lenders are now forwarding letters to consumers who have been in persistent debt for about 18 months. In fact, they also warn them regarding the cycle they are in.
After 18 months, credit card providers render consumers a convincing way of payback their left amount over a reasonable period of time.
This might be by waiving the interest rates or reducing the charges. But, your regulator has the power to discontinue your credit card in order to prevent you from borrow any more.
Potentially Justifiable Factors
For many customers, the new debt rules are endorsing concern that the lenders will block their credit cards. However, the FCA stated that the firms are not capable of discontinuing a credit card without having a potentially justifiable cause.
It also recommends firms to make convincing compensation that consumers can easily afford. In case, if you are uncomfortable with this payment, let your bank know about it.
According to the FCA, this is not a matter of hesitation to take assistance if consumers find that the lenders are not proving the proper help.
About the New Debt Rules
Before learning the ways to clear your credit card debt, try to know what the new debt rules are. Hence, check the undermentioned section to know them properly.
The newly launched order pursues a market study by the FCA. This will determine the accounts for 34 million credit card consumers over a period of five years. Moreover, it also inspects approximately 40,000 consumers.
From the month of September, the organization will be in charge of operating some instructions. This will help certain consumers to recognize their persistent debt over 18 months.
- Once anyone remains in a situation of consistent debt for more than 18 months, banks will contact them and ask to pay back their balance amount. They may also warn that their credit card might be discontinued if they do not pay the exact payment amount at a regular interval. In some cases, they might ask you to refer to debt advice professionals.
- If any consumer has been in persistent debt for more than 27 months, then they will get a strong warning.
- In case, a consumer has been in persistent debt for more than 3 months, banks will offer a convincing method to compensate for the pending money. If the consumer is not able to compensate the amount, then the FCA promotes the firm.
However, they might ask you to show the ‘forbearance’. Only then, they might decrease, waive or abort the fees, interest or charges.
There is no fast and hard rule to predict when a consumer’s credit card might be suspended. However, it can happen if the consumer is not able to compensate for their balance even after 36 months.
So, the new rules and regulations are there to help those people who are struggling with persistent debt for a long time. It is a way that will help to decrease the credit card interest without getting a new card. It is popular as the “Credit card shuffle”.
Hence, you can shift debt to cards with the minimum interest rates and simply refund the lower payment on them. Thereafter, try to focus as early as you can to pay back the balance amount.
According to the FCA, there is no ultimate order that firms must consider the consumer’s other debt into account. However, they will prompt regarding this when they offer a reasonable method to pay back the remaining amount.
Credit card organizations have also admitted adopting voluntary measures in order to enable the consumer to opt-out of getting credit limit enhancements. It also has complied not to render credit limit increment for consumers who are in persistent debt for 1 year or 12 months.
So, according to the FCA, this will almost benefit 1.4 million accounts per year. However, the firms which do not agree to these newly created rules and regulations can be subject to action from the FCA.
Is it a Reliable Way to Clear the Credit Card Debt?
If you want to pay back any sorts of long-standing credit card debt or persistent debt, the most reliable way is by depositing a lower amount every month. But, if you only make the lower amount of payment, then it would be quite expensive for you.
Actually, the minimum payment just fulfills the fees and the interest cost and a small amount only go towards clearing the debt amount. Also, keep in mind the minimum amount, which is charged as a percentage. Therefore, it will take longer to compensate for the overall balance amount.
Further Questions that you Might Have
We hope the information below will help you to clear your further doubts regarding the credit card debt.
1. What Will Happen if your Credit Card Account is Suspended?
A suspended account is not completely closed. However, the card will be dismissed when you are attempting to reuse the credit in order to pay at a store or online purchase.
2. What does Suspended Bank Account Mean?
When a consumer has not enough funds to make payments, then the bank can suspend or disclose an account. In fact, the banks or lenders can put a hold on the consumer’s card. In such situations, consumers need to either forward the required money or arrange the amount in order to compensate for the balance amount.
3. How do you Reactivate the Credit Card?
Whenever you want to reactivate your deactivated credit card, call the automated system on your credit card account. When you are prompted, enter the required details such as telephone PIN and account number.
If the automated system prompts there is credit available in the account, it means the card is still activated. Therefore, you don’t need to reactivate the card. Else, you can start using your credit card again.
4. Can a Bank Suspend an Account along with its Money?
If there is a specific cause to suspend an account, then the bank can freeze it along with its money. The bank can debit the money for interest or fees and even suspend the account for just any cause.
After cleaning the remaining amount if there is any balance available, then the money is still yours. Hence, you can use it as per your requirements.
5. How Long can a Bank Lock an Account?
Once an account gets locked or frozen, it goes into holding for a minimum of three to four weeks. However, during this time, the available balance is still in your account. Despite it, you will not be able to access your money.
So, in order to unlock your account, you have to make the correct decision. You can either choose sitting with the bank manager and resolve this or counter-suing them.