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| Fasano, Legal & Financial Experts |
When they're trying to attract new business, credit card companies are keen to advertise market-leading balance transfer offers and other attention-grabbing perks. However, they're less willing to volunteer certain other pieces of information.
So if you already have a credit card or you're considering applying for one, make sure you're familiar with the following six facts.
If you find yourself in credit card debt and feel your lender is behaving unreasonably, you're not powerless.
According to the Lending Code that governs banks and building societies, lenders "will not subject customers to harassment or undue pressure when discussing their problems".
They have just been told they are no longer allowed to use Facebook, Twitter or other social networks to contact you, for example, as making public what should be private is causing "stress and embarrassment".
And credit card companies must also ensure attempts to recover debt either by the company or "another party" are "carried out within the appropriate legal jurisdiction".
As a case in point, Devon businessman Keith Harrison had £20,000 of credit debt written off earlier this year when a judge ruled he had been "tortured" by hundreds of calls from his lender MBNA and a debt collection firm Link Financial.
Bear in mind, Harrison's case is rare and if you're experiencing debt problems, it's probably wise to contact the company to explain your situation.
If you're clued up with your finances, you probably know better than to withdraw cash on your credit card. In most cases, you'll pay an extremely high interest rate, which is often between 25% and 30%. ( Consider applying for a Cashplus - Find out more here )
Furthermore, many card providers charge interest on your cash withdrawals from the moment the money leaves your account. This system is unlike the vast majority of credit card transactions on which you won't pay any interest if you clear your balance in full when your next bill arrives.
What's worse, there are a series of transactions that count as a cash withdrawal — and so attract the same fees and charges — which you might not expect.
So even if you clear your debt when you receive your next statement, you could still be hit by hefty interest payments on certain transactions or cash withdrawals.
Have you ever received a letter from your credit card company informing you the interest rate on your credit card is set to increase?
If so, you've been the victim of a practice known as "rate jacking" and, unfortunately, it's perfectly legal. Provided they give you 30 days' notice, a credit card company is entitled to increase the interest rate you pay on your credit card.
However, you don't have to sit passively back and accept the higher rate. Under current rules, borrowers have 60 days to object to the increase. By choosing this option, they will be able to repay the debt at their current interest level "within a reasonable period".
If you've managed to secure a market-leading 0% credit card deal, you'll need to be diligent if you want to hold onto it.
A number of lenders will withdraw an interest-free offer if you fail to make a minimum repayment or exceed your agreed credit limit. Should this happen, you would revert to the representative APR.
A similar scenario may also apply if you take out a credit card to earn rewards or cashback. If you fail to pay your bill on time in one month, you may lose any rewards you've earned during that period.
Under the terms of the Consumer Credit Directive, a lender is only required to offer its representative APR to 51% of accepted borrowers.
Almost inevitably, companies give their most competitive deals to customers with the cleanest credit scores. As a consequence, you could end up applying for a card expecting a particular interest rate — only to be offered a much less favourable deal.
If your credit card company offers a more competitive representative APR than the one you're currently receiving, try asking to move onto the lower rate. What's more, you could say you'll take your business elsewhere if necessary.
Unsurprisingly, this tactic has a greater chance of success if you always make your payments on time and are likely to be accepted for a more competitive card elsewhere.
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