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MSE News: Credit card interest should be capped, MP says
Former_MSE_Helen
Posts: 2,382 Forumite
in Credit cards
"Labour's Yvonne Fovargue wants interest to stop once a user has paid interest equivalent to three times the sum borrowed..."
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A cap should be placed on the amount of interest credit card users in debt should have to pay, an MP has argued in the House of Commons.
"Labour MP Yvonne Fovargue says the move would help stop cardholders' money problems spiraling out of control.
She wants interest to stop once a user has paid interest equivalent to three times the amount borrowed."
My take on the unsecured debt problem in the UK is that there should be a minimum payment of the amount outstanding. With a rule to pay e.g. 5% of the total outstanding every month people can see that they can't borrow limitless and the banks/credit card companies can't entice consumers to drag their debt into the future, milking the interest to the max.0 -
Rather than capping the interest rate (which would allow certain people to borrow even more), there should be a minimum payment of the amount outstanding. With a rule to pay e.g. 5% of the total outstanding every month people will see that they can't borrow limitless and the banks/credit card companies can't entice consumers to drag their debt into the future, milking the interest to the max.0
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As we've seen with car insurance, once you limit what a company can do it will adjust rates to maintain a fair margin.
If they cap the interest at 3 times borrowed amount then more people will get rejected for cards, rates would be higher etc. Personally I'm not even sure that the measure would help much given that it would take 7.5 years at 20% interest for the interest to reach treble the amount.
If we honestly think that less credit card borrowing would help these people then why not regulate the credit limits and number of cards they can have. Personally I think it would just drive more of them to even worse lenders, but it would be good to see a rational data driven approach rather than action for the sake of it.Having a signature removed for mentioning the removal of a previous signature. Blackwhite bellyfeel double plus good...0 -
Personally I'm not even sure that the measure would help much given that it would take 7.5 years at 20% interest for the interest to reach treble the amount.
Presumably though they are more thinking of the sub prime cards who charge significantly more than 20% APR and knowing how approximately MPs speak I'd guess they are also considering fees as part of the "interest" they are talking about.
TBH, the issue of credit card interest is a much smaller one compared to Pay Day Loans and other sub prime lending but then again that is presumably they decided to target it because it makes for good headlines rather than tackling the big issues.
Limit what banks can get and you'll limit what they're prepared to give out and raise the charges for everyone else.0 -
Perhaps they should cap MPs expenses, salaries and pensions.
Perhaps they should investigate MPs letting out their homes to other MPs.0 -
opinions4u wrote: »Perhaps they should cap MPs expenses, salaries and pensions.
Perhaps they should investigate MPs letting out their homes to other MPs.
or childrenDon't put your trust into an Experian score - it is not a number any bank will ever use & it is generally a waste of money to purchase it. They are also selling you insurance you dont need.0 -
Having thought a little, I like kbrumann's suggestion but think the suggested cap would be a better way of achieving the same conclusion.
Why? Because if the amount of interest is capped, lenders will be more keen to get the money back sooner. The obvious way to do this is to increase the minimum payments so that the debt is paid off sooner. But the MPs suggestion doesn't force them to do this, so for a low-risk customer with a low interest rate, the minimum payments will be the same as now. But on the sub-prime cards, they might increase the minimum payment level.0 -
CCs have pretty low rates by the standards of payday loans.
4000% APR anyone?We need the earth for food, water, and shelter.
The earth needs us for nothing.
The earth does not belong to us.
We belong to the Earth0 -
There is also ready a minimum payment on credit cards.
How about people take some personal responsibility? If you spend a lot on your card with the intention of only paying of the minimum every month then you can afford to spend it - rates are advertised when you take the card.
How many other caps and rules will we have to bring in to protect the foolish?0 -
How many other caps and rules will we have to bring in to protect the foolish?
Well, they are bringing in rules and regulations because there are "too many tariffs" from energy companies, forcing them to reduce the amount of tariffs. This means some people will pay less, and some will pay more.
It'll end up the same with CCs, the providers will find another way to bring in revenue, such as yearly fees.0
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