What Charges Can You Face?
Aside from the interest charges you pay if you don’t clear your balance in full each month there are two fees that you may also have been charged. Interest charges are entirely fair and can’t be refunded unless something very unusual has occurred, but the other two charges are more murky.
Most credit card companies will charge you a fine for missing a payment or going over your card limit. Up until a few years ago that charge could be – and often was – as much as £35. So, even if you missed your monthly payment by just a couple of days or you exceeded your card limit by just £1 you’d receive a hefty fine.
Thanks to an investigation by the Office of Fair Trading (OFT), fines are now around £12 – and you can reclaim fines if you believe they were unfair.
Why Can You Reclaim Charges?
Back in 2006 the OFT investigated credit card charges and concluded that many lenders were charging far too much. It told lenders that if they charged £12 or less they would not be subject to investigation. Lenders duly obliged and dropped their charges in order to avoid the bad press of a clash with the OFT.
But it was too late. The spotlight had been shone firmly on fines and the OFT had made it clear they wouldn’t side with lenders if consumers contested the fines. So, if your lender has been charging you more than £12 you can cite the OFT’s recommendation as evidence you’ve been unfairly treated, and you will, in all likelihood, win your money back as the lenders know they are fighting a losing battle.
No matter how small the fine, you are entitled to a refund if you can prove the charge was unfair.
Even if your fines have been £12 or under it is still possible to make a claim. If you believe the fines to be unfair or if you can prove financial hardship you may be eligible for a refund. Rather than having to address why it has charged you so much, your lender (like many others have) may take the easier option of refunding you.
How to Avoid Credit Card Charges
Prevention is better than cure and, while it is possible to reclaim your credit card charges, it is easier to avoid getting them in the first place. Here’s how:
Never miss a payment
The most sensible option – and the best way to manage your credit card – is to pay off your balance in full every month. Making sure you meet your minimum monthly payments is the next best thing. One way to guarantee you will never be charged is to set up a direct debit to make the minimum payment each month. That way even if you forget you won’t run the risk of being fined.
Cut your interest
If your card has a whopping great interest rate most of your money is being eaten up by interest rather than clearing your debt, so you are more likely to go over your limit. Do something about the rate by transferring your balance to a 0% balance transfer card or 0% purchase card.
If you are incurring credit card fines because you can’t always afford to make a monthly payment then you need to learn to budget. Work out your essential outgoings (and your credit card payment should be one of these) against your income. Make sure all your essentials are paid before your ‘not-so-essential’ spending begins.
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A Step-by-Step Guide to Reclaiming Charges
In England and Wales you can seek a refund of credit card charges from as far back as six years ago – whereas in Scotland it’s five years. If you’re looking to make a claim here’s how to go about it.
Find and calculate your charges
If you have online banking see if you can access all your bills for the past six years that way. If not, contact your credit card provider and ask for a full list of all past charges – you are legally entitled to this information under the Data Protection Act, but your credit card company are allowed to charge up to £10 for the info, and most will – but it is worth it if you think you have a few fines you’ll be able to reclaim.
When you start adding up your fines include late payment fees and charges for breaking your card limit, but not standard account fees or interest, you cannot reclaim these costs.
Apply for another credit card
Once you start the reclaiming process your lender may cancel your credit card. But you can be prepared for this by switching your balance to another credit card before you begin the process. Use our comparison tools to find the best balance transfer or purchase card for you.
Ask for your money back
Now you’re ready to write to your lender. State in your letter that you believe the charges were unfair and list them all, including the amount you were charged and when. When you ask for your money back you have a choice over how much you ask for. You can either claim you were charged over the OFT recommended £12 and seek to reclaim anything over this amount for each fine. Or you can say you feel ALL of your charges were unfair and seek a total refund, it might take longer to get the full amount back though, and you may have to go to the Financial Ombudsman but the rewards could be substantial.
Consider charging interest
Since you’re already up for the fight you may want to try a cheeky little tactic to get as much as you can from your lender and that involves charging interest. If your case were to go to court you’d be entitled to claim for an extra 8% on top of your refund. When writing to your lender it may be worth mentioning this to see if they’ll pay up. Even if they don’t it can be a good negotiating tactic, ask for it then offer to take the money without interest in return for a speedy settlement.
Your lender may reply and agree to the refund as requested in which case well done you. Or it may offer a token payment (perhaps offering to refund some of the charges or agreeing to the full refund but refusing the 8% interest) in which case it’s up to you to decide whether to accept (although it probably makes sense to say yes). If your lender says it will fight your claim, let it know you’ll fight harder. Do not back down.
“See you in court!”
Let your lender know you are willing to pursue court action or take your case to the Financial Ombudsman Service (FOS). The Ombudsman settles disputes betweens lenders and customers. You can only approach the Ombudsman if it has been eight weeks since you first contacted your lender about a refund.
The FOS can be a slow process, but it is free so is the best option for most people. But, if you need the cash quicker you could take your case to the small claims court instead. This can cost between £25 and £100 depending on how much you are claiming, but if you win your fees will be refunded. Most people win simply by default because the banks don’t defend themselves. But there is a chance it will go before a judge. To start the process you will need to fill in an application form. You can do this online or in person at your local county court.
Your application form should outline your claim and if possible include supporting documentation. The lender will then effectively be ‘served’ and will have 14 days to respond. If it doesn’t the court may rule you are entitled to the full payment or set a date for a court hearing. If it does respond you will be told when to go to court. After the hearing you will receive a decision in writing within a few days.
If you lose the case it’s unlikely the judge in a small claims court will order you to pay the other party’s fees however there is an initial application cost. If you fill in your application online you’ll pay between £25 (for claims less than £300) and £100 (claims up to £5,000). If you pay in person the fees range from £35 to £120.
What to Do Now
- Get hold of your old credit card bills and work out how much you can claim.
- Contact your credit card provider and ask for your money back.
- Prepare yourself in case you need to go to the Financial Ombudsman or small claims court.