Shoppers spending on their plastic are being trapped by the companies that take money from their cards each month, adding to the overall credit card debt owed.
The problem starts when companies set up ongoing payments that allow them to dictate the ongoing payments taken from the card, but which aren’t stopped when the customer stops receiving the product or service.
Even if the credit card is cancelled, the monthly payment may still be deducted which can cause huge credit card debts and thousands of pounds owed in interest and charges, caused by payments which the customer thought had stopped.
Some customers fail to spot that the payments have continued months later their service has been cancelled, by which time hundreds of pounds may have been deducted without them knowing.
With some interest rates of over 20% added to this amount, the actions of these companies can leave customers with debt problems that can be difficult to trace and escape from.
On most occasions there has been a genuine mistake and the company will cancel the transaction and refund any monies taken.
However in some cases, companies which set up the ongoing transactions can be hard to track down, or they may refuse to act upon requests to stop taking the money. Some simply ignore all correspondence.
Debt advice organisations have warned about the consequences of this.
Ivan Cooper, Chairman at leading debt management company Chiltern, said: “Even when people think that a service has been cancelled, payments may still be deducted, which can add to the debt management issues of those already struggling with their accounts.
“The stealth with which these payments are taken makes it very difficult for people who don’t keep on top of their finances difficult to track.
“It’s always worth checking that these payments stop being deducted from your account, otherwise the credit card debt that could develop may cause further debt problems in future.”
Debt advice organisations offer a number of ways for people whose debt problems have escalated to regain control of their finances, whilst still repaying their outstanding unsecured balances (Personal loans, overdrafts, credit card debts etc).
In many cases, debt problems can be relieved with some simple budgeting and debt advice. In others though a professional debt help solution may be required – such as a Debt Management Plan (DMP), Individual Voluntary Arrangement (IVA) or Trust Deed.
Reputable debt help firms, such as The Debt People, Hamilton Locke and Chiltern, can provide free debt advice along with offering a full range of debt help solutions where necessary.
Following their free debt advice they may suggest a Debt Management Plan (DMP) or an Individual Voluntary Arrangement (IVA) to relieve your finances.
A Debt Management Plan is a flexible way of repaying multiple unsecured balances – like loans and credit card debts – with a single affordable monthly payment. This makes managing finances simpler. The amount you pay is based on how much you realistically can afford, once priority payments (rent/mortgage, food, utility bills council tax etc) have been accounted for.
The amount that is available following the deduction of priority payments is called the “disposable income”, which is then distributed to your creditors on your behalf on a pro rata basis by the debt advice company.
An IVA works in a similar way to a Debt Management Plan but it is repaid over a fixed period of time – usually within five years. Once the IVA term is complete and payments have been maintained, all remaining unsecured balances are written off and you can walk away debt free.
For immediate debt advice, or for more information on debt help solutions, please call the number at the top of this page.