Credit card profits: Lenders don't help borrowers who make minimum payments, warns FCA

People in "persistent levels" of debt are loved by the plastic lenders as interest piles up regularly and profits soar

(Corbis)

Are the plastic card companies making too much money?

Only out of people who can't really afford to repay their debt in full it seems. The Financial Conduct Authority warned this week that millions of borrowers who make minimum payments on plastic are so profitable for credit card companies that they are disinclined to help them.

They don't help any customers, do they?

Actually they do. They contact people who miss payments and do what they can to help them get back financially on their feet, such as putting them in touch with debt charities.

Why do they help some customers and not others?

Those that stop paying stop being profitable. So credit card companies do what they can to help people afford to make their repayments again. Those in "persistent levels" of debt or who only manage to make the minimum payment each month – an estimated 3.6 million people – are loved by the plastic lenders as interest piles up regularly and payments come in and profits soar.

So they're only in for the money?

What else would you expect? Credit card companies make money each time you use the card and make money on the interest they charge you if you don't pay the outstanding balance off the card each month. The idea of helping people get back on a firmer financial footing is anathema to their accountants because if struggling people were to start clearing some of their outstanding debt, it would reduce the massive profits card companies can make from them.

Does the watchdog want them to help all at-risk customers?

Yes. It has called for measures to give consumers more control over credit limits and utilisation, and measures to encourage consumers to pay off debt quicker when they can afford to. It has also asked firms do more to identify earlier those consumers who may be struggling to repay and to take action to help them manage their repayments.