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"Government credit card proposals could adversely affect consumers"

By admin | November 16th, 2009 | Credit Cards

It has been claimed in a recent report that recent proposals that were put forward by the government with regards to regulation of the credit card industry could actually end up having an adverse effect on consumers, and could ‘tip them over the edge’.

The government has been looking to toughen up on regulations for the credit card industry, with the aim to make things fairer for the consumer. However, some claim that the regulations could cause problems for the consumer.

The new regulations have been proposed by the Department of Business, Innovation and Skills, and amongst the changes that the department wants to see is an increase in the minimum repayment that the credit card providers ask for.

At present the card providers ask for a minimum percentage of the debt or £5 depending on which is the greatest, but many are concerned that those that pay only the minimum repayment will be in debt for decades even for a relatively small debt, and will pay a huge amount in interest. It is thought that around 11 percent of cardholders make only the minimum repayment on their cards.

However, some officials and campaigners are worried that having to pay a higher minimum repayment could tip some cardholders over the edge financially if they are already struggling to make repayments.

One official said: “For customers already struggling to meet repayments, an increase in how much they are required to pay each month could tip them over the edge. More measures would need to be put in place to stop these customers getting further into debt.”

The proposals also include making credit card firms allocate repayments to the higher interest debt first before hitting the lower interest debt on the card, and this is a move that has received great support.

One official said: “It is basic financial common sense that you repay your most expensive borrowing first and the cheapest last, yet the majority of the card industry gives its customers no choice but to do the complete opposite.”

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