What Does the Coronavirus Outbreak Mean for Credit Card Debt?

A woman holding three credit cards
Amid worries over financial uncertainty due to COVID-19, many people are wondering what’s going to happen with their credit card debt and whether or not they can get help. Here’s what you need to know about the options available...

Note: The information in this article is correct at the time of writing (24/03/2020), but we will keep it updated as the situation changes.

As the country moves to more extreme measures to prevent the ongoing spread of coronavirus, uncertainty and worry continues to surround people’s finances and many wonder what the impact of COVID-19 will have on their money and any existing debt. 

While many mortgage companies are thankfully offering payment holidays to their customers, many banks and lenders are offering relief on credit card debt, too, and there is also help for people who are currently in ‘persistent debt’. 

Step Change, a provider of free debt advice online, states that not all credit card suppliers have stated their plans for customers affected by coronavirus yet, so it is highly advisable that you contact your specific lender to see where you stand if your situation changes. 

This article will take a look at:

  • How those in ‘persistent debt’ are getting help
  • Martin Lewis’ advice on applying for 0% credit cards now
  • The lenders offering credit card repayment holidays
  • How a balance transfer card may be an option for those needing to pay off a high amount of credit card debt. 

Changes for people in ‘persistent debt’

The Financial Conduct Authority (FCA) uses the term ‘persistent debt’ to refer to people who are paying off their credit card debt but paying more in interest, fees and charges compared to what they have actually borrowed. 

Up until February 2020, people who were in ‘persistent debt’ and struggling to pay off their credit card were receiving letters from their borrowers regarding their debt and the impact of coronavirus, to which a response was expected promptly. In February this year, however, banks were ordered not to continue sending out such letters. 

Additionally, in light of the coronavirus outbreak, the FCA has been responding to the difficulties currently being faced by the public, stating that customers should be given more time. Therefore, customers now have until 1st October to respond to any such communications from their lenders. 

This now means that the FCA’s ‘persistent debt’ rule still applies, as people are still expected to respond to communications, but credit card providers are not able to suspend people’s credit cards if they do not respond to their lender before 1st October, giving people a welcomed bit of breathing space.

Credit Card Applications - Advice from Martin Lewis on 0% finance

Those who follow the regular financial advice provided by MoneySavingExpert’s Martin Lewis will know that when it comes to getting a credit card, he states that it should only be used for “one-off, planned borrowing”, but due to the fact that we are in “different logical times”, his advice has now changed slightly. 

He has said that 0% credit cards could now offer people a way of paying for necessary living costs if their finances have been affected, without incurring interest on their debt. 

But, if you want to get a zero percent credit card to help during these difficult times, Mr Lewis urges people to apply for one as soon as possible, as he has heard that “credit card firms are already starting to tighten acceptance criteria - never mind the fact that many people’s incomes may be compromised".

If you do need to apply for a 0% credit card, be sure you apply for one sooner rather than later - and only use it for necessities and essentials like food and medicine during this coronavirus pandemic - spend sensibly! 

If you want to apply for a credit card or balance transfer card (see below), remember that it is likely to depend on your credit score and history – check yours now with CheckMyFile.

For more information on the credit reference agency, CheckMyFile, read our full review here. Or, for to learn more about credit scores, read our article: A Complete Guide to Credit Scores in the UK.

Credit Card Repayment Holidays

Before requesting a payment holiday on your credit card debt, you should look at all your available options first. You can get free debt advice from reputable companies like Step Change and Citizens Advice

People who are struggling to pay off their credit card debt due to financial issues caused by coronavirus may be entitled to a three-month repayment holiday, similar to what’s being done with mortgage relief. At the moment, however, it depends on who you’ve borrowed credit from. 

Step Change are reassuring borrowers that while not all lenders have announced their plans to help those paying off credit card debt, “most creditors are willing to be flexible and supportive to anyone who’s been affected by coronavirus, to try and prevent them falling into financial difficulty”, further stating that you should get in touch with your provider as soon as you possibly can to find out what help is available. 

By contacting them, you may find that they may be able to help by offering you more credit, increasing overdraft facilities and limits, and even cancelling late payment fees. 

Step Change do advise, however, that you should find out how getting financial help through your provider could impact your credit score

Some credit card providers who are currently offering help and relief to customers include: 

  • Barclays - The provider is not offering repayment holidays, but has cancelled fees (late payment and cash advance) from between 19th March and 17th June. It is also possible to apply for a temporary increase on your credit card limit. Contact them by calling 0800 046 8324, but lines may be very busy, so your other option is to visit their website for more information. 
  • Lloyds Banking Group and MBNA - Both lenders are offering credit card repayment holidays, but it is not yet clear how long they will last. They are also cancelling fees for late payments on credit cards, and customers are able to temporarily increase their credit card availability and reduce their interest payments. Even after using these services for financial help, you’ll be able to continue using your credit card. You can call 03456 062 062 to find out more, or contact them by visiting their website. MBNA - using their online services is likely to be more efficient for you. 
  • Capital One - The lender is offering a three-month credit card payment holiday to those impacted by coronavirus, and they are getting rid of any late payment fees. However, if you use these measures to help ease financial pressure, you may not be able to continue using your credit card - it all depends on your individual situation. Their phone number is 03444 812 812, but you may want to contact them via their app or website as phone lines are currently very busy. 

For further information on the financial help currently being offered by banks and lenders, read our guide Can I Get Financial Help If I Am Affected By Coronavirus?

Balance transfers - For high credit card debt

One possible solution for people who have a lot of credit card debt to pay off is to get a balance transfer credit card, depending on your credit score (check yours here).

With this, you can transfer an existing high-interest credit card balance to a new card, which enables you to pay it off with 0% interest over a set period. 

This potential option is available to give you more time to pay off your debt, without the added pressure of paying interest on top. 

Again, using Martin Lewis’ advice above, you should do this sooner rather than later, before companies start implementing harsher acceptance criteria on credit cards.

What’s been said?

Other banks and lenders are currently reviewing ways in which they can provide financial help to their customers during this difficult time.

Chief Executive of banking industry and body UK Finance, Stephen Jones, has said that “banks, building societies and other lenders in the UK are actively preparing for the negative impacts of COVID-19 and focused on supporting their customers over what will be a challenging period for all.” 

The best advice we can currently give to people paying off their credit card debt amidst the coronavirus pandemic is to contact your lender to find out exactly where you stand and what help is available to you. 


Related articles: 

The Best Sites to Get a FREE Credit Report and Score

Can I Get Financial Help If I Am Affected By Coronavirus?

Government to Support Millions of UK Self-Employed Workers with New Scheme

The Best Credit Reference Agencies in the UK

Tips for Employees Working From Home Amid Coronavirus Outbreak