Credit cards: new ‘rights and rules’
Have you heard about the new ‘framework of rights and rules’ for credit card users? Apparently, the Government and the credit card companies have agreed on a few changes to the way credit cards work in this country. For example…
First of all, the highest-interest debts will be paid off first. This is one that’s more important than it sounds – using a payment to clear the part of a credit card balance that’s growing fastest (rather than clearing the low-interest part, as many card companies used to do) can save the card user more than you’d think in the long run.
Second, people will have the right not to get any credit limit increases in the future, and the right to reduce their limit whenever it suits them.
Third, they’ll get more time to ‘reject’ increases in their interest rate or their credit limit.
Fourth, card holders who are ‘at risk of financial difficulties’ will be given ‘guidance on the consequences of paying back too little’. Again, this can be a lot more important than it sounds – just put ‘credit card calculator’ into a search engine. Whatever you owe, and whatever the interest rate you’re paying, you’ll be amazed when you see how much difference changing the timeframe makes. Repaying a debt more quickly can take thousands off the overall amount you end up repaying.
Credit cards: does debt consolidation make sense?
Even so, the new rules won’t make a lot of difference to many of the people out there with credit cards. My brother, for example, doesn’t have any problems affording the payments – it’s the hassle of keeping up with multiple debts that he’s not keen on.
He was telling me about debt consolidation loans: taking out a new loan and using it to clear all his debts at once. He’s seriously considering this, just to take the hassle out of his monthly finances – he could make one payment a month and watch his debt go steadily down, instead of having to make six payments to six different companies every month.
Plus, it’d make it a lot easier to see how much he still owes, and when he can expect to clear the debt altogether. So for someone in his situation, consolidating his debts could make a lot of sense.
