NEW credit card rules that came into force this month could save consumers £1.3 billion a year in interest charges.

The changes by regulator the Financial Conduct Authority (FCA) are designed to help those with long-term card debts or who risk getting into financial difficulties.

FCA figures show that four million UK customers in persistent debt pay an average of £2.50 in interest and charges for every £1 borrowed. But, until now, card providers have not been keen to do anything about it.

It is not hard to see why. Someone borrowing £3,000 at an annual rate of 19 per cent and making only the minimum monthly repayments, starting at £74, would take 27 years to clear their debt and pay £4,192 interest.

But if they had set their repayment at £108 a month, they would have paid it off in three years and handed over only £879 interest, saving £3,313.

Under the new rules, card firms must take a series of escalating steps to assist customers who have been making low repayments over a long period.

After 18 months with an outstanding balance, the issuer must make contact to request the repayments are increased and explain that the card could ultimately be suspended if this does not happen.

When a customer has been in debt for 36 months, they should be offered a way to clear what they owe in a reasonable period. If they still cannot do it, the provider must negotiate, if necessary reducing, waiving or cancelling interest, fees or charges.

The new regime, which the FCA calculates will cut the UK’s collective interest bill by between £310 million and £1.3bn a year, came into force on March 1, but providers have until September 1 to comply.

Christopher Woolard, FCA executive director of strategy and competition, said: “There is a risk customers can build up and hold debt over a long period of time without making much headway on the outstanding balance.

“Under these new rules, firms will have to help customers to break the cycle of persistent debt and ensure customers who cannot afford to repay more quickly are given help.”

Providers have also agreed to let customers opt out of automatic credit limit increases, while those in debt for 12 months will not be offered increases.

Georgie Frost, consumer advocate at price comparison site GoCompare, believes the changes do not go far enough.

She said: “For most people credit cards are another useful tool to manage their finances and they will not be tempted by the extra cash. But for those who are just about keeping their heads above water, the extra money could be seen as a lifeline that will only delay them from seeking much needed help.

“The default should be to not increase credit limits without express permission for everyone, rather than to assume an increase will be welcomed unless indicated otherwise.”

To minimise the amount you contribute to providers’ profits, make sure you choose the best card for your needs.

For those looking to spread the cost of purchases, Sainsbury’s Bank, Halifax, Post Office, MBNA and nuba all have cards charging no interest for 30 months or more.

If you already have a balance, you might save significantly by moving to a lower cost card, but be sure to choose a different provider, as firms do not permit transfers between their own brands.

Several cards allow interest-free purchases and transfers for two years or more, but remember to factor any initial fee – typically two to three per cent of the debt – into your calculations.

MBNA, nuba, Barclaycard, Tesco and Sainsbury’s have cards charging no interest on transfers for 36 months or more. Only those with a good credit record will get the best deals, with other borrowers offered less favourable rates.

Whether you choose a purchase or a transfer card, do everything you can to clear it during the free period.

If you do not, and you cannot find another low-cost transfer deal, the rate will typically rise to 19 or 20 per cent, making this an expensive way to borrow.

And never miss a repayment or go over the credit limit as the interest-free deal will be withdrawn, forcing you to pay the card’s standard rate until the debt is repaid.

If you are having difficulty clearing what you owe, contact the provider immediately to discuss your options.

Free impartial debt advice is available from Citizens Advice Scotland. Find your nearest office at or call 0808 800 9060.