Archived 26 Jan 2009
This is a step-by-step guide, including template letters, to force your current or old credit card provider(s) to repay the last six years of late payment fees or charges for going beyond your limit. Often you can get Ј100s or even Ј1,000s back.
In this guide.
While every effort’s been made to ensure this article’s accuracy, it doesn’t constitute legal advice tailored to your individual circumstances. If you act on it, you acknowledge that you do so at your own risk. We can’t assume responsibility and don’t accept liability for any damage or loss which may arise as a result of your reliance upon it.
Why can we reclaim credit card charges?
The simple question is, ‘does it really cost Ј35 to send an automated letter when someone’s gone 1p over their limit’? Over the years, that’s exactly what card providers have done whenever people have missed credit card repayment dates or bust through their credit limit. And it’s for this reason you should be able to get back the last six years’ worth of cash.
Even the OFT says credit card fees are unfair
Not that many realised then, but a report in April 2006 by the Office of Fair Trading (OFT) was crucial in supporting reclaimers’ cases. Having investigated credit card charges the OFT said, in plain language, that it would not launch a specific investigation on any card companies with charges lower than Ј12.
While the OFT ruling had no technical power, across the board, most card companies reduced their charges to this Ј12 level. This was of course, a positive step. But actually this figure, in my view, is still too high as the real administration costs are usually little more than a couple of pounds.
Yet it certainly has made it a lot easier to reclaim back the difference between what you were charged and the Ј12 figure. So for each Ј35 charge, you should get at least Ј23 of it back; though many may be able to get the whole Ј35.
The bank charges test case didn't impact credit cards
You may have heard of the disapointment in the 2009 bank charges test case where the Supreme Court decided that charges could not be assessed for fairness. It’s important to understand this is specifically about bank charges and does not apply to credit card claims.
Be inspired by other MoneySavers' success stories
Many thousands of people have already been successful; here’s just a couple of examples.
I issued a court claim but the whole process was very quick and easy. I requested bills two months ago and have received a letter this morning saying it will pay up in full: Ј581 (includes interest and court costs)
NatWest Credit Card: Claimed Ј75, Won Ј80. Mint: Claimed Ј75, Won Ј81. I didn’t get an offer at any stage so went to the Financial Ombudsman who sent me these offers of the cash within 10 days.
Read more of these stories, and report your own success in the credit card reclaiming successes forum discussion.
How to avoid credit card charges in the first place
If you're incurring charges and unable to pay off your balance, it's a danger signal. It means you have money management and over-indebtedness issues. While these charges are worth fighting, it’s also important to turn the spotlight on yourself.
Are you managing your money properly? Are you spending beyond your means? By far the best thing to do is to avoid them in the first place. This isn’t just to save you cash and hassle. If you’ve got fines from your credit card company, each one takes a chunk out of your credit score. This means you need to do three important things.
- Make sure you never miss a payment
This is easy to do. Simply set up a Direct Debit to pay off the card each month. You can do this for just the minimum repayment, and that way you’ll never be fined. Yet only paying the minimum will leave you in debt, virtually forever (see the Danger! Minimum Repayments guide), so just consider it a way to ensure there won’t be a penalty – and continue to pay by cheque or card payment each month on top.
The more interest you pay, the less of your money goes towards paying back the actual debt and the more you’re likely to go beyond your limit. It’s easy to slash credit card interest, either by shifting your debt to a new card (see Best Balance Transfers ) or getting a new card for cheap spending (see Credit Card For Spending ).
It may be that your debts are simply a symptom of overspending. There are a number of ways to combat this, by simply shifting to better value products (see Give Yourself A Pay Rise and Budgeting ) or simply Stopping Spending ). If you are getting credit card fines, this is a good way to deal with them.
Step-by-step guide to reclaiming
The following steps show you how to reclaim credit card charges and include all the template letters you’ll need. Remember the prime aim here is to get you the money, not make a political point. So consider each step part of a negotiation, to make your reclaim as quick and easy as possible. You should treat each credit card, whether current or closed, as a separate reclaim.
It’s important to understand that in the world of reclaiming, things can change all the time. Any changes will automatically go in the free weekly MoneySaving e-mail.
Reclaiming won’t hurt your credit score
Many people worry about the impact of reclaiming charges on their credit rating. Don’t. Banks and credit card companies can't put a note about your reclaim on your credit reference files, although the fact you missed a payment or went beyond your credit limit in the first place will already have affected it.
While the reclaim won't be on your overall file, individual card companies may keep their own notes on you as a ‘difficult customer'. This may impact any future applications you make to them.
Step 1. Find all your charges and add them up
You need to find all the fines you’ve been charged by each credit card. You can go back six years in England and Wales or five years in Scotland;
these time periods are limited by law. This includes late payment and ‘over the limit’ fees, but not standard account fees or interest.
What if I don’t have the details?
Let’s be honest, how many people have all their bills going back six years? If you’ve online banking access, first see what’s available there, if not send a letter to your credit card company requesting a fully comprehensive list of all past charges. Some will send you the information if you phone, so you could try this first.
Either way, you’ve a legal right to do this under the Data Protection Act. If you don't know where to write to, MoneySavers have compiled a list of data protection addresses which should help.
Unfortunately card companies are legally allowed to charge for this info - the maximum amount is Ј10 - and card companies being card companies, they tend to charge the full amount. So to save time, enclose a cheque for a tenner in your letter.
The card company only has a maximum 40 days to respond. If you don’t hear anything back, follow up with a phone call. If you're still getting a wall of silence, then report it to the Information Commissioner for a breach of rules.
Step 2. Get a ‘backup’ credit card in case of closure
Sadly, if the card is still active, some providers may close your card account when they pay out the cash – a bit of a "we'll pay up, but get lost" gesture. So if you’re still using the card, you need to take this into account. Luckily it’s easy to sort out.
If you can simply pay the debt off, great. If not, apply for a new card or cards to gain a big enough credit limit to shift the debt to; this should also save you money (see the Best Balance Transfers guide).
If you have a poor credit score so you can’t get cheap new credit, then as long as you have available credit on any other cards (see Credit Card Shuffle ), you can use your overdraft to repay your card, or you can get a bad credit scorers' card as an emergency, use this.
Don’t be overly scared by the prospect of this. The Financial Ombudsman has ruled against providers closing accounts and it happens less than it used to. So if yours is closed, it’s worth making an official complaint. You may be due even more compensation.
Step 3. Write to your credit card company and ask for your money
Now it’s time to contact the credit card company to ask for your cash back. All you need to do is write and say you believe all your past charges were unfair (don’t forget to detail them) and you want your money back.
The 2006 OFT report greatly improves the chances of a successful reclaim, although it does mean there are different amounts you can ask for depending on when you incurred the charges, and how much work you want to put in.
How much should I ask for?
This is where it gets a bit trickier. But don’t worry, it’s simply about how hard you’re going to push. Remember, the OFT has pretty much indicated any charges higher than Ј12 are challengeable.
Charges from before June 2006. Credit card charges from before this date will usually have cost between Ј30 and Ј35. With these, you can ask for either the full amount of each charge to be refunded or the difference between the actual charge and the OFT-recommended fee of Ј12. So, a charge of Ј35 minus Ј12 would give a refund of Ј23.
Charges after June 2006. For any charges on or after June 2006, you were probably hit for Ј12 each time. As this is already set to the OFT-recommended amount, you simply need to ask for the full Ј12 amount to be refunded.
The pros and cons
Providers are much more likely to pay out the ‘difference’ figure than the full figure; so if you just want the easiest route, this is for you. Alternatively, many have succeeded in getting the full fee back (especially for pre-June 2006) as credit card companies aren’t keen to justify their charges in court. Though this may mean more of a fight, and you could end up needing to ask the Financial Ombudsman to take on your complaint or start court action.
Whilst most people shouldn’t need to get this far, it’s likely to take slightly longer - but balance this with the possibility of receiving a bigger payout. Having said that, as I believe the charges are unlawful, I think it’s worth asking for the full refund at this stage. You can always change your mind later on if you are offered a settlement for the difference between what you were charged and Ј12.
Charge interest on top
If you were to go to court and win, you would be entitled to add 8% interest (not compounded) on top of your claim, from the date you were ‘first deprived’ of the money (ie the date of each charge).
Therefore as a negotiating tactic, you may want to ask for the interest as part of your initial claim. Do understand though, you’re not legally entitled to interest unless you win in court. Asking for interest now is all part of pushing the lender. Think of it as a bit like haggling.
You may strike lucky and get the interest on top. Even if not, asking for it could help push the provider to settle quickly, as it may just say “here’s the money, without interest”. In which case, I’d grab it.
Of course there is a risk that asking for too much makes it less likely to settle too - sadly this is an art, not a science. If you'd prefer to play safe, simply ask for the charges without interest in the early stages.
The Credit Card Interest Calculator
If you do want to ask for interest, the calculator below will work it out for you. Just enter each of your charges (or the difference between your charge and Ј12 if you’re using that route) and add them to the list.
When you’re ready, click ‘print’ and a new window will pop up with a schedule of your charges. To save the list and avoid typing it in again, highlight the text in the window, then copy (Ctrl + C) it and paste it into Word.