Martin Lewis Explains Proposed Relief On Overdrafts And Credit Cards
In recent weeks, a whole raft of changes have been introduced to support people who are struggling to cope through the coronavirus pandemic.
And now the Financial Conduct Authority (FCA) has proposed further relief to help keep people on top of their finances during this difficult time, including freezes on credit card payments and interest rates.
It should be noted that these are just proposed measures; the public consultation starts today with a decision expected next week.
But with finances being a bit of a labyrinth at the best of times, monetary whizz Martin Lewis has come to the rescue once again to guide us through the maze.
Taking to Twitter, the Money Saving Expert set out the headline changes proposed by the FCA.
Firstly, the move could mean big things for those having to dip into their overdrafts, with interest rates being shelved on the first £500 ($621).
Martin said: "The overdraft change is especially important. In a terror of timing, by next Monday - the start of the tax year, almost all lenders were due to be charging about 40 percent EAR on overdrafts - nearly double high street credit cards.
"That made overdrafts the new danger debt. This change reverses that, at least in the short term, both with the minimum £500 interest-free, but also because it's required that no-one will pay more than they used to due to the changes."
However, Martin went on to clarify that the 0 percent interest is based on a person's agreed limit with their bank UP TO £500, so it depends on what you have set up with your branch.
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"If your authorised limit is lower than £500," Martin added. "Then you won't get a bigger limit, but all of it will be 0 percent."
Responding to one follower's question on whether those who don't have an agreed limit will still be eligible, he said: "You can ask but wont be automatically offered (£500 limit)."
Customers who are struggling will also get a three-month break from credit card repayments.
However, according to Martin, this is slightly more confusing and should be treated with caution.
He explained: "Payment holidays mean exactly what they say, you don't pay, but you can still be charged interest.
"And with interest rates often high, especially on cards, that can mean storing up trouble for the future. "
Adding: "Those struggling for cashflow may have no choice, but if you don't need to do it, don't do it."
The consultation starts today (2 April) and will end on Monday (6 April). If the new changes are agreed upon, they will come into effect on Thursday (9 April).
For more information, visit the FCA website, here.
LADbible and UNILAD's aim with our campaign, Cutting Through, is to provide our community with facts and stories from the people who are either qualified to comment or have experienced first-hand the situation we're facing. For more information from the World Health Organisation on coronavirus, click here.
Featured Image Credit: PA