700,000 credit card payment holidays granted to help coronavirus-hit borrowers
8 May 2020, 13:44
Lenders have put various stop-gap measures, including payment holidays, in place to help people who are struggling with their repayments.
Nearly 700,000 payment holidays on credit cards have been granted as part of stop-gap measures to support borrowers whose finances have been affected by the coronavirus.
Lenders have also provided almost 470,000 payment freezes on personal loans, according to the figures for the period up to the end of April released by trade association UK Finance.
Firms have also worked to ensure these steps will not harm customers’ credit files, as taking a payment holiday will not be reported to credit reference agencies as the customer being in arrears.
Interest will normally continue to be charged during payment holidays – so customers taking this option may end up having to pay back more money over the longer term after the payment holiday ends.
Interest-free overdraft buffers of £500 have also been applied to more than 27 million personal current accounts – both in response to customers asking for it and buffers being put in place automatically.
This interest on pre-agreed overdrafts up to £500 will be completely waived – although overdraft customers may still be charged if they are more than £500 in the red, for the amount they have borrowed above the temporary interest-free buffer.
On April 9, the Financial Conduct Authority (FCA) told lenders that it expected firms to offer a temporary payment freeze on loans and credit cards for up to three months, for consumers negatively impacted by coronavirus.
The FCA also said overdraft providers should allow customers, who are negatively impacted by coronavirus and who already have an arranged overdraft on their main personal current account, up to £500 charged at zero interest for three months.
It emerged this week that Virgin Money had emailed some credit card customers, blocking them from further spending.
However, the bank announced on Friday that it has reversed its previous decision, saying it has listened and recognises that it is not the right time to make the changes.
Virgin Money also revealed on Wednesday that it has given payment holidays to around 32,000 credit card customers and 8,000 personal loan customers.
Stephen Jones, chief executive of UK Finance, said: “Many people across the country are facing financial pressures due to the coronavirus, and lenders are taking decisive action to help them through these tough times.
“Payment holidays on loans and credit cards and interest-free overdrafts can provide much-needed support to those with short-term cash flow pressures, whether it’s to cover next week’s grocery shop or next month’s utility bill.
“A payment holiday may not be the right choice for everyone, and lenders have a range of options to help customers through the Covid-19 crisis.
“We would encourage any customers concerned about their financial situation to check with their lender, starting by looking at their website which will have the latest information on the support available.”
People in financial difficulty can also get free debt help from the Money Advice Service, or speak to a debt help charity such as StepChange.