Freezing Your Credit Card: What You Need To Know
Freezing your credit card interest and charges can help you tackle debt. You’ll continue making payments and be able to clear what you owe more quickly.
If you’re struggling to keep up with your credit card bill and don’t have the ability to switch to another card with a better rate, you can ask your provider to freeze interest and charges as part of a strategy to get to grips with your debt.
Whether you’re only making your minimum repayment, or have actually fallen behind with your payments – known as being ‘in arrears’ – freezing credit card interest and charges prevents your debt growing. And it can help you clear what you owe more quickly.
How does a credit card freeze work?
It’s something you can request from your credit card company, but there’s no legal obligation for it to agree to freeze interest and charges. The good news though is there are several voluntary codes of conduct most credit card companies have signed up to and which encourage them to help.
If your provider does agree to freeze credit card interest or any other charges associated with missed payments, it will usually do so for a set period of time. This can vary from a few months to indefinitely depending on the circumstances – after all, the last thing the credit company wants is for you to stop making repayments altogether.
And the interest won’t get added back on to your account when your situation improves.
How to get a credit card freeze
The sooner you inform your credit card provider that you’re having trouble paying, the sooner it can take action that can help you. Get in touch by calling customer services – the phone number is usually printed on the back of your credit card.
You will need to explain your current financial situation and you will likely be asked to send some proof by email or letter – such as a budget showing how much you can afford to repay and copies of bank statements.
Once satisfied with the information, the credit card company can then offer you a variety of options to try to help you get back on your feet, which may include freezing the interest you owe and waiving any relevant charges.
The main advantage of this is that it stops your debt growing when you’re not adding to your credit card spend so any money you can repay goes towards clearing your balance rather than just chipping away at the interest.
The ability to reduce payments and repay your debt more quickly is a good thing so you shouldn’t wait until you’re in dire straits before you speak to your credit card company.
Will freezing my credit card affect my credit score?
Not if you agree to a freeze before missing a payment. Acting quickly and working out a solution with your credit card provider before you miss repayments will prevent damage to your credit score. But let bills go unpaid and your credit file will be updated and your score will deteriorate.
Coronavirus and credit card payment holidays
In response to the global Coronavirus pandemic, the UK financial regulator – the Financial Conduct Authority – has introduced measures to help people experiencing financial hardship. One such measure is the ability to take a credit card payment holiday without it affecting your credit score.
The payment holiday typically lasts for three months but can be extended up to six months.
Unlike freezing credit card interest, during a payment holiday interest continues to accrue on your account so after the holiday finishes, your debt will be bigger than when it started.
As a result, your credit card provider may increase your minimum repayments. This will make it harder to repay what you owe. So consider the consequences before requesting a payment holiday.
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Laura Whitcombe is a freelance journalist, campaigns consultant and co-author of Money Made Easy 2015/16 published by Harriman House. Read more