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 £100s or even £1,000s back.
In 2006, the Office of Fair Trading ruled these charges of up to £35 were unfair, and many believe they’re actually unlawful. So use this guide to join the 100,000s who’ve reclaimed their cash and got their money back. And if you’ve heard bank charges reclaiming is no longer possible, don’t worry, this doesn't apply to credit card reclaiming!
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 £35 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 £12.
While the OFT ruling had no technical power, across the board, most card companies reduced their charges to this £12 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 £12 figure. So for each £35 charge, you should get at least £23 of it back; though many may be able to get the whole £35.
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: £581 (includes interest and court costs)
NatWest Credit Card: Claimed £75, Won £80. Mint: Claimed £75, Won £81. 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.
Cut the cost of the interest
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).
Sort out your finances
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 £10 - 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 £12 are challengeable.
Charges from before June 2006. Credit card charges from before this date will usually have cost between £30 and £35. 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 £12. So, a charge of £35 minus £12 would give a refund of £23.
Charges after June 2006. For any charges on or after June 2006, you were probably hit for £12 each time. As this is already set to the OFT-recommended amount, you simply need to ask for the full £12 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 £12.
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 £12 if you’re using that route) and add them to the list.
Now use the template letter
Below is a template letter that includes all options; the ‘difference’ or full amount; with and without interest, for you to select the relevant parts.
Letter template: Asking for your money back
There can be a variety of outcomes
- VICTORY! You get all your money back
For a lucky few, the provider will simply write back and offer to pay you the money. This is more likely to happen if you have asked for the difference rather than the full fee and if you're experiencing any financial hardship. If this happens, congratulations!
- MOST LIKELY OUTCOME! You’re ignored or refused
There are a myriad of tactics that card companies will use to dissuade you from carrying on. The most common outcome is you get a letter explaining that the charges were detailed in your terms and conditions so are lawful and that it’s prepared to fight.
It may tell you that you’ve no case, there’s been a court ruling, that it can’t provide your details, or that it’s satisfied with the way it's acted.
These are all common tactics using spin, spiel and carefully written scary notes to put you off. It’s all just another step in the dance. If the summary of the letter is 'no you're not having your money back', however they dress it up, then in the words of Kenneth Williams... carry on regardless.
- It says your case is suspended
Some providers are using the OFT test case, which only applies to bank charges, to say that credit card complaints are also not valid. This is NOT correct. Both of the consumer regulators, the OFT and the Financial Conduct Authority (FCA), specified a case against current accounts.
If your card company says your case is on hold, write back to clarify that your claim is in relation to credit cards and that you will be continuing with your complaint.
- It makes a partial offer
There is a chance it’ll offer some of the money you want. If you have asked for the full refund, this may be the difference between the fee and the £12 OFT recommendation. Whatever it offers, you need to decide whether it’s worth continuing or just taking the cash.
Remember, in the letters, YOU set the timetable. So stick to YOUR timetable and don't allow the provider to dictate.
Step 4: Threaten to take it to court
If your enquiry was rejected, deemed invalid or you didn't receive a response, write to inform your card company that you’ll be taking court action or going to the Financial Ombudsman if it doesn’t settle.
In many ways this is just a repeat of step 3, but in more militant fashion. Include a strict limit of the time you give it to respond. Some people skip this step, but it’s often worth a shot, as it tends to be when the provider starts taking you seriously.
If you want a speedy settlement, one tactic is to offer it the option of settling for a lower amount if it pays out now. There’s no need to do this, it’s simply your choice – although if you choose to, my template letter includes a section on this. Do note the phrase ‘without prejudice’ I’ve used, it’s crucial. It means that the offer isn’t binding or admissible in any further legal process.
At this point the likely outcomes are still similar to Step 3. Though the chance of getting a better settlement is improved.
Should you accept a partial offer at this stage?
This is always a very tough decision. Whilst there’s a temptation to say ‘fight the good fight and take ‘em on’, what’s actually more important is protecting your pocket.
Let’s say you’ve £500 of charges and are offered £350. The first thing is try not to think “I’m £150 short” but instead that you’ve got £350 you thought was gone forever. The ultimate decision is yours. It’s a combination of whether you want the hassle of continuing versus the certainty of the cash.
Step 5: Go to court or the Financial Ombudsman
If you’ve received a full, or nearly full, settlement then there’s no need to read on, just take the money. If you’ve not, you now have two choices. You need to consider eitehr getting legal on their backsides or going to the Financial Ombudsman (FOS), which also has power over these cases.
It may seem strange, having threatened court action, to now consider a change of tack and go to the Ombudsman. The reason is simple. Threatening potential court action in the earlier letters is more likely to push the credit card company into offering a settlement. Yet remember, this guide is a negotiation path designed to get you your money back as easily and swiftly as possible.
So once we’re at this point, even though we’ve threatened court action, there’s no need to follow through. If the right move is to change tack, that’s not a problem.
The two routes are as follows:
- Financial Ombudsman Service (FOS)
This is a free and independent service created by Parliament to help settle disputes between financial companies and their customers. You will need to sign a consent form and send copies of your documents, but you then hand over contact with your card company to the Ombudsman. To find out exactly what to do read the Going to the Financial Ombudsman section.
Small claims court system
Don’t automatically think judges and wigs, this is actually about filling out a claim form online. There’s a starting fee from £25 to £210 depending on how much you're claiming, but it's refunded with successful claims. To find out how to start a claim read the Small Claims guide.
Pros and cons
Let me be plain. When it comes to credit card reclaiming:
The vast majority of people will find it easier, less risky, and more successful to go to the Ombudsman.
This is because so far it’s never failed. Unlike the courts, you never have to pay; and there’s no risk that a judge might think the bank charges decision applies.
Better still, even if you pick the FOS, you have the choice to also take court action if you don’t like the Ombudsman’s decision and you don’t mind waiting longer for any payout.
The only main advantage with a court is that it can be quicker. Put a claim to court and if, as is common, the bank doesn’t acknowledge the claim (see later for more details on this), you’ll win by default in 14 days and get your money back speedily with the 8% interest added on top (compared to the FOS taking a few months).
Going to the Financial Ombudsman
The Financial Ombudsman Service (FOS) is an independent service for settling disputes between financial companies and their customers. The service it provides is completely free.
The FOS will usually only assist in your case if it has been over eight weeks since you sent your first complaint letter (see Step 3), so follow the rest of my steps until it's been eight weeks (unless your bank has sent you a letter suggesting you use the Ombudsman, when it can help sooner).
How to make your claim
You just need to contact the Ombudsman and ask it to take on your case. You can either do this by calling 020 7964 0500 or via the FOS website. After contacting it, you'll need to fill in and post back a copy of its complaint form to explain your case and so that it has a copy of your signature. It’s important you ask for interest as if you were going to court (don’t ask, don’t get) and continue to ask for the full refund and not just the difference between what you were charged and the £12 guide price from the OFT.
While the form is quite simple to fill in, it's important to take care doing it. To help I've written a guide, which takes you through filling in the form step by step. It's written in Word so you can easily cut and paste sections of it and/or print it out and have it next to you as you're filling in the FOS form.
You should also send copies of any previous correspondence you've had with your bank.
The FOS will then send you a confirmation letter that it will look into your case and get back to you if it needs any more information, but otherwise you can then leave the matter to it to resolve and it'll contact you with any offers from your bank.
At the moment it is finding that many complaints are settled in the early informal stages as the banks do not want to be investigated, although the process does still take several months to be resolved. This also means if you’re asking for interest, it’s likely you’ll get that too.
How does the Ombudsman work?
When the FOS receives your complaint, its job is to settle the argument and come to a decision about your case. It does this by going to the card company in question and asking it about the case. If the company does not agree to make the payment to you, the Ombudsman may carry out a formal investigation, which the card companies don’t want to happen!
If for some reason you’re not happy with the FOS’s decision, you do not have to accept it and you can then start court action if you would like. However if you do accept the Ombudsman's decision, it’s binding on both you and your card company (meaning your company can’t appeal and has to pay you back). If you use the FOS please tell us your experiences.
Also, see the Your Financial Rights guide for other complaints the FOS can help with.
Going to court
While it’s not the preferred method, if you do choose to go to court rather than opt for the FOS, go online for ease. It doesn’t usually get as far as you having to turn up in court. Card companies don’t really want to get that far as it would mean having to reveal their true costs or set a precedent for other courts to follow.
It’s all about the small claims rules
Claiming money from your card company counts as a civil case, as it’s you against an organisation. In standard civil cases, the losing party may be asked to pay the legal costs of the winners. This can be very expensive, yet if a case is heard under the ‘small claims’ system, costs are not awarded (although a judge could decide either side may need to pay for a limited amount of the other party's expenses), making it a much less risky bet.
Small claims in England and Wales are cases under £5,000, before any statutory interest is added. Credit card claims are usually a lot less than this, but try to keep claims below this if possible, either by making a separate claim for each card with the same company, or if you're just a few hundred above the limit you may want to consider lowering the asking amount down to £5,000 (even if your earlier letters demanded more) to minimise the risk.
In Scotland and Northern Ireland, while the law is similar, the small claims process works differently. In Scotland the maximum claim is £3,000 and you may only reclaim five years' charges, in Northern Ireland the maximum claim is £2,000. This article is written based on the process for England and Wales, so for more details see Northern Ireland Courts and Scottish Sheriff Small Claims.
How to make your claim
For ease, use the Moneyclaim website in England and Wales (there's also the Northern Ireland Courts Online) which can be used for starting most county court money claims, just go there and fill in the form. There’s a fee of between £25 and £100, depending on the size of your claim, which can be paid by a credit or debit card: though it’s refunded if, and hopefully when, you win.
If you don’t have plastic to pay on, get the paperwork to start the claim from your local county court and pay there. It’s a little bit more expensive, but only by a few pounds. All fees may be waived if you’re on benefits.
Once the case is started, there’s a race on between you and the card company. Can it get in a defence or at least acknowledge they’ve had the paperwork within 14 days? If not, you can ask for a judgment against it for the full amount of the claim without any hearing.
This is why it's an easier option to use Moneyclaim Online, as there your request is likely to be actioned much, much faster than by your local county court. One eminent legal source said to me, with his tongue firmly in his cheek (never easy to talk that way). "There is no risk on the internet of an overworked county court clerk wrapping up his uneaten cheese sandwiches in your judgement request form and throwing it away”.
A technical note: while it’s rare with these cases, submitting a claim for less than £5,000 doesn’t guarantee it’ll be heard as a small claim. If it’s contested and seen as a difficult case, it can be tried in the county court as a non-small claim (on what are called the ‘fast track' or the ‘multi track'), which could mean you have to pay costs, though this is very rare.
What happens next?
After you’ve submitted a Moneyclaim, what happens next depends on the card company’s reaction. It takes five days for the claim to be ‘serviced’ and all deadline dates start from that point.
- VICTORY: The credit card company settles in full
For the sake of expediency the company may settle in full as a ‘goodwill gesture’, including interest and court fees; though it almost certainly won’t admit it ever did anything wrong. This is most common for smaller claims.
- VICTORY: The credit card company does nothing
Often the company simply doesn’t acknowledge the claim and this means you automatically win by default, 14 days after the claim is served (which takes five days). At that point, you must request ‘judgment by default’, this can be done online, and you should do it as soon as possible (get it in your diary and plan around it, to the second if possible) after the 14 days ends.
- VICTORY: The claim’s acknowledged but there’s no defence
Companies have 14 days to acknowledge a claim after it's served. If that’s done, they have a further 14 days to respond and enter a defence. Commonly they do an acknowledgement, but no defence is entered. Again this means you win, though this time after 28 days. At that point, immediately request a ‘judgment by default’; this can be done online.
- It says it will defend the claim
I know this is the point where people get scared, which is what the companies want. But even if your credit card company does this, don’t worry. In most case it's simply a way to try and make you settle, or argue that you've asked for too much (eg, you've gone beyond six years or tried to claim too much interest).
At this point, you’re now in the proper court process. You’ll be sent a straightforward form called the Court Allocation Questionnaire which you need to fill out and return to the court with a £40 fee. The next stage should be a small claims hearing date, although this might not happen as the company could offer a settlement first.
If you get to the hearing stage, there is a further fee of £25 - £325, depending on the amount of your claim. What could happen is that the companies will either not turn up, in which case the judge simply throws the case out and awards in your favour, or will ask for a stay of your case. See below for more info on what to do if this happens.
It’s worth me repeating that all fees are refunded if you win. If you can’t afford the cost, read the Financial Ombudsman section, as it’s free.
In case your reclaim is different, it’s worth doing proper preparation before your court date as the judge is likely to question you and it’ll make you feel more confident if you understand your complaint.
- Your case is stayed
Since the OFT announcement to run a test case into bank account charges in July 2007 a few banks requested that credit card claims be dealt with in the same way, and sadly some local court judges did although the OFT test case is specifically about current accounts.
If this happens to you, contact the court to clarify that your claim is in relation to credit cards. It should either suggest you request a removal of the stay, by completing form N244 and paying a fee of £75 or that you write a letter to the court explaining that you wish the stay to be removed and why.
Writing a letter in the first instance would save you the £75, although you would get this back if, and hopefully when, you win, and if this doesn’t work you can put in the official form afterwards.
If you win and it doesn’t pay, send in the bailiffs
Sadly, when the banks/card companies don’t defend a claim, they don’t always pay up automatically even though they’ve lost. Whilst mention of bailiffs isn’t normally the most cheerful subject on this site, let’s happily make an exception. If the company doesn’t pay, you’ve a right to send the bailiffs in to claim the money; and again it’s easy to do via the Moneyclaim site.
Where to get further information and help
Whilst credit card reclaiming has been going on for as long as bank charges reclaiming, it’s not been as big. Fewer people know it’s possible and fewer still have asked for their money back.
A lot of people that have been through the reclaiming process, though, and many are willing to help share their experiences; so here are further resources to use if you get stuck.
Discuss it with other MoneySavers
There is an entire section of this site's forum dedicated to reclaiming bank and credit card charges, where thousands of people regularly discuss it and a specific thread to discuss credit card claims.
Other bank/credit card charge websites
There are a number of small free websites dedicated to reclaiming unfair charges and helping consumers. The ConsumerActionGroup is a focused web forum based purely around reclaiming charges; it’s run by a group of people who took on the banks in the very early stages. PenaltyCharges is run by a law student who successfully took on the banks and campaigns on the site and LegalBeagles has regular updates.
A number of law firms, and claims handlers, now offer to claim back your charges for you. In general, I wouldn’t bother; simply do it yourself and don't bother using a law firm. However, if your case is more complex and/or you simply wouldn’t do it yourself, then bringing in a law firm is a reasonable last resort.
If you are going to use a lawyer make sure you fully understand the charging structure. You should NEVER PAY ANYTHING UPFRONT OR IF YOU LOSE. If the company is not open and up-front about its fees (usually around 25% of what you get back) look elsewhere. See our What to check when picking claims handlers checklist (written for PPI but most of the checks are the same).
All claims companies must be regulated for claims management activities and will have a reference to check (e.g. CRM1234) on the Ministry of Justice database. Avoid anyone not on this list.