MSE News: Labour pledge to cap credit card interest a 'positive step', says Martin

Labour can "pledge" anything they like to attract votes, e.g. abolish student tuition fees, then backtrack. It still doesn't guarantee it will happen though.

MSE founder Martin Lewis has welcomed Labour's pledge to cap credit card interest so that no-one pays back more than twice the amount of their original borrowing.

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MoneySavingExpert.com founder Martin Lewis said:

"Borrow £3,000 at 17.9% making just the min repayments (on a typical card) and it can take 27 years to clear at an interest cost of £4,000."

I think there's an easy solution: increase the minimum payment.

At the moment the minimum payment on many cards is interest plus 1% of outstanding balance.

In the example given, increasing the minimum payment to interest plus 2% would ensure than less than twice the amount borrowed is paid back.

Increasing the 2% minimum payment in step with the ARP would make it work for everyone.

For example, someone borrowing £3,000 with an APR of 39.9% would have a minimum payment of interest plus 7%.

Increasing the minimum payment to at least £25, as some cards already have, would ensure that small amounts of card debt didn't linger for months.

The downside is that doing this would make a lot of punters unhappy.

I wonder where Martin feels that personal responsibility should start/end.

Lots of people make silly financial decisions such as paying over the odds for iphones they don't really need. Should retailers actually check their customers can sensibly afford such deals and that they understand how much the fiance is costing and how perhaps whether the customer would be better off making a pension provision with the expenditure?

In almost every financial transaction the seller will be a large company with more 'financial nous' than the buyer so does that mean the state should get involved in every transaction setting all prices and deciding who can buy what?

I am not saying that in certain circumstances there should not be regulation; I am just wondering where the line of personal choice and personal responsibility should be drawn?

If the card companies have any sense they will be increasing the minimum payment % for Dec statements due for payment January, then again certainly within another 2 years. If I were them I would also be defaulting people very quickly in the hopes they get their money before the interest cap comes into effect.

Labour make it up as they go along. They can promise the earth but when in power they can make all the excuses going for not going ahead with their proposals. However the Conservatives are probably no better.