Minimum Payments with MBNA: Has your card been affected?

Former_MSE_Dan

What's happened?

Many Moneysavers are receiving letters saying their credit card Direct Debit's being dropped to just the minimum repayment, especially from MBNA cards (inc. A&L and Virgin).

This could be a really expensive thing for some borrowers, possibly adding £1,000s to the cost of paying off the debt. If you have received a letter from your card provider , please reply below and tell us who it is.

The Excuse

Apparently as some have fixed Direct Debits lower than the minimum, it's stopping fixed repayments for everyone.

The Nightmare Cost

Making the min repayment on a standard MBNA card means it'll take 67 years to repay a debt of £5,000, costing £29,300 in interest.

What to do

Tell it how unhappy you are. If it forces the switch, then if possible use the 'pay off in full' option. If not you've two choices.

A. Stick with the minimum repayment and ensure you manually overpay each month.
B. Set up a standing order from your bank account to pay a fixed amount each month

I wouldn't suggest you ever just cancel the minimum repayment and go for a pure manual payment each month. That leaves you open to the risk of a late or missed payment fine, which can hit your credit score, and with MBNA mean you lose any promotional deals.

Guide & Calculator: Danger Minimum Repayments

If you have received a letter from your card provider, please tell us below

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loveandlight

On the flip side of this I have been making minimum payments every month to Amex because I have a low life balance of 3.9% and have been throwing money at my higher interest cards.

Amex have today pulled all my remaining credit saying they have reviewed my account and don't like me paying the minimum amount as 'people who can afford to pay more often do' and as I haven't been doing that I am obviously struggling financially.

They say because I have only been making minimum repayments I am now classed as a higher risk and likely to go under!!!!

I do have a perfect payment record and a clean credit file.

Bismarck

sounds like bullocks to me...they're just not happy with you having a long-term LOB deal and will try and seek to weasel out of it. how have they pulled your credit?

aloiseb

They would rather you pay for 67 years on the never-never (ie minimum payment) than have a proper plan for actually paying the thing off. However, they can't stop you payign it off by standing order so I don't see how they can win with this one.

I have had the letter from MBNA, and was amazed by their duplicity. (pretending it was all for my convenience, indeed!!! Ha!!!) Still, it was a good cheap deal, 6.5% lifeof balance, so I'm not really complaining - I suppose!

magictouch

Hi I have received a letter saying that the credit card direct debit is being dropped to the minimum repayment.My hubby and I decided to apply for Virgin card so we could transfer from another card and clear the debt in 15 month or less.Well not very happy with the change,so will call Virgin later and cancel dd...and for a minute I thought that they were helping people,once again I have been proved wrong,they only think about filling their pockets with money that they "steal" from us

MerryMichaelW

I had a run in when these people changed their card provider, adopting the minimum payment scam. Reported them to the FSA, who were completely bored - that is why MBNA and others are trying it on.

furryjen78

We haven't received a letter, but about six months ago we changed our DD to a fixed amount with Sonycard (MBNA). I was flicking through statements recently and noticed that about three months ago they'd changed our payments back to minimum payments, apparently without any notice being given. We had just transferred the balance off but unfortunately they've just come up with a fairly good 0% deal until July so we're going to shift some other debt onto it. Standing order is the way to go I think. I personally am not a big fan of MBNA at all as their payment methods are clearly set up so that you'd never pay off the capital.

firesidemaid

on my last mbna statement i noticed that 'minimum payment due next month' has actually gone up!

i have a great LOB rate and normally pay approx £13 a month on a balance of 5k+. the payment for next month has been 'set' at £25. it looks like this is now a)fixed and b) a minimum amount.

so i will now be paying mine off twice as quick!

YorkshireBoy

magictouch wrote: »

...will call Virgin later and cancel dd

furryjen78 wrote:

Standing order is the way to go I think.

Before cancelling minimum payment DD's and paying by SO, remember that your minimum payment DD is your free insurance policy against £12 late payment charges.

With MBNA, the minimum payment DD will be collected regardless of any other payment you make by other means, so just subtract the '£25' or 'interest + ppi + charges + £5' (whichever is the greater) from your desired monthly payment and pay the difference each month by SO or bill payment.

furryjen78 wrote:

We had just transferred the balance off but unfortunately they've just come up with a fairly good 0% deal until July...

Unfortunately?

funkidiva40

Mmm, Martin has had the same knee jerk reaction that I did when I first read my notification from Virgin that they were doing this. I pay £70 per month off my card and if its reduced to the minimum payment they will get about a fiver.
However, Virgins letter does go on to say that one can also set up a standing order to run parallel with the min. payment direct debit so although I was miffed that I would have the (minor) hassle of setting this up it did keep me in control of my finances and i can continue to pay off more than the minimum amount. Im miffed that its Virgin - I have a naive belief that Branson is a cut above the bankers, durrr. :mad:

eggy1

I couldn't believe it when that same letter arrived last week. Even someone like myself who is trying to keep my head above water and have no debts other than mortgage and my 0% Virgin card :A... we are being 'tricked' into paying just the minimum amounts for our cards. I have been paying £100 a month and the minimum payment is £20 ... so there is no reason, other than to get us into debt after our 0% special deal ends. Its appalling and some poor souls will jump at the chance to pay the minimum amount but this will seriously hurt their finances in the long run. When i phoned VIRGIN MONEY to complain i was given the most ridiculous reasons for their change in policy. If I hadn't got 7-8 months left at 0% i would have swapped to another company. Its grim business tactics and takes advantage of those already in debt!!! :mad: