Sainsbury’s Bank stops accepting self-employed workers for credit cards and loans
SAINSBURY’S Bank has stopped accepting applications from self-employed people for credit cards and loans.
The bank told that it has made the changes "temporarily” because of the coronavirus outbreak - but the move won’t affect existing customers.
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Sainsbury’s offers one of the longest 0 per cent periods for purchases, offering up to 20 months interest free - but it's only available to Nectar card users.
Money expert Martyn James, from Resolver, warned that other banks could follow suit.
He told The Sun: “I’d say it’s inevitable that banks and lenders will introduce similar restrictions.
"When the economic outlook is uncertain, lenders become very, very cautious."
“We’re already seeing much tighter restrictions on mortgage payment holidays for people wanting to extend existing arrangements, so it’s likely that this will filter down to loans and credit cards too.”
We've contacted several other lenders to see if they will be following Sainsbury's temporary ban.
Lloyd's, Tesco, M&S Bank and Virgin Money said they are still continuing to offer loans and credit cards to the self employed.
Rachel Springall, a money expert at Moneyfacts group, told The Sun that as credit cards and unsecured personal loans are not tied to someone’s home, they're a much riskier form of lending.
This is because there is a higher chance of defaults.
She said: "Credit card providers act quickly when the risk to take on debts escalates and right now there is a refocus of credit card propositions to mitigate debt write-offs.
"There is no sure signs that other providers will join a change in employment assessment but every lender can look to change their criteria in line with how the market is moving.”
Helen Saxon, banking editor of MoneySavingExpert.com, described the move as a "wide-ranging exclusion", as several self-employed people were operating before and during the pandemic and could make repayments as normal.
She added: "Sainsbury's Bank had already limited who could apply for the card by only accepting applications from those who have a Nectar card and have had that card for six or more months.
"Now they've further tightened criteria."
The move is one of many difficulties that have hit self employed workers during the pandemic.
Despite Chancellor Rishi Sunak’s furlough initiative or its self-employed income support scheme (SEISS), many people have fallen through the cracks as they don’t qualify for either drive.
It led to campaign groups ExcludedUK and ForgottenLtd being launched to give a voice to those workers, which was backed by MoneySavingExpert founder Martin Lewis and MP Caroline Lewis.
What do I do if I'm self employed and can't get a loan or credit card?
We asked Money expert Martyn James for his advice about people who may need a loan or credit card during these turbulent times.
He said:
- Be honest with yourself about what you need the loan or credit for. For example, if your finances are in dire straits, you’d be better off speaking to free debt charity StepChange about help with a debt plan. But if you need money to keep afloat, go through the business adviser at your bank and get them to lay out all of the options for you.
- Run a credit check. Have a look at the free credit reports available. There may be some things that are wrong or need correcting on your credit file. Tackle these now before applying for credit.
- Do a trial application. Some businesses allow you to check to see if you might qualify for lending without going through the whole process of formally applying.
- Speak to HMRC. You could defer your tax bill until things are a little clearer.
Meanwhile, in May, we spoke to an expert who warned that self-employed workers looking to remortgage their homes now have tighter restrictions in place.
A Sainsbury’s Bank spokesperson said: “We constantly review the market and consider a number of factors, when providing Credit Cards and Loans. We’re sorry for any inconvenience this may cause these customers and we’re keeping this decision under constant review.”
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Meanwhile, it's been revealed that furloughed workers are three times more likely to have defaulted on a payment.
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The Sun's Consumer Crew has compiled advice on how to find the right mortgage during this time.