Barclaycard borrowers could see debt last for decades

mitrant

Personally, I feel that this move by Barclaycard isn't necessarily too different from any lender that uses a minimum payment scheme. All minimum payments are designed to keep customers in debt simply because the lenders know they can exploit the lack of knowledge the average joe has regarding credit. I've encountered multiple people who are so ignorant as to how their credit cards or store cards work they honestly believe that paying the minimum payment on an item they've bought is a good thing - completely unaware of how much interest they'll rack up in the mean time... and the amount of people who don't understand the terms of credit agreements is phenomenal.

What we on this forum might consider basic knowledge is something that a large number of people are completely oblivious too... and there are a lot of people who believe that having their income eaten up by credit payments is a normal way of life because they simply don't understand what their debts are costing them in the long run.

ILW

mitrant wrote: »

Personally, I feel that this move by Barclaycard isn't necessarily too different from any lender that uses a minimum payment scheme. All minimum payments are designed to keep customers in debt simply because the lenders know they can exploit the lack of knowledge the average joe has regarding credit. I've encountered multiple people who are so ignorant as to how their credit cards or store cards work they honestly believe that paying the minimum payment on an item they've bought is a good thing - completely unaware of how much interest they'll rack up in the mean time... and the amount of people who don't understand the terms of credit agreements is phenomenal.

What we on this forum might consider basic knowledge is something that a large number of people are completely oblivious too... and there are a lot of people who believe that having their income eaten up by credit payments is a normal way of life because they simply don't understand what their debts are costing them in the long run.

Or maybe an intelligence test as pert of the application form.

CLAPTON

MSE_Dan wrote: »

Hi ILW,

Sorry maybe that wasn't very clear; I mean setting the MMR as a percentage, so that it decreases in actual amount each month, keeping you in debt for longer, is a bad thing. Paying off a fixed amount that you can afford costs far less over the life of the balance.

Dan

presumably you mean paying a fixed amount or a fixed percentage whatever is the greater.

mitrant

ILW wrote: »

Or maybe an intelligence test as pert of the application form.

Personally, I've often thought that basic areas of "adult life" should be taught in secondary schools. Managing credit arrangements and the like could easily be incorporated into maths classes... but instead they choose to teach us stuff about when trains are going to pass each other... like I'm James Bond and need to know that...

Former_MSE_Dan

CLAPTON wrote: »

presumably you mean paying a fixed amount or a fixed percentage whatever is the greater.

Hi Clapton,

I mean a fixed amount eg. £50, is often better than a percentage eg. 2% of outstanding debt.

The first will stay the same, and pay the debt off quicker; the second will decrease as the debt decreases, costing way more in the long run.

Dan

CLAPTON

MSE_Dan wrote: »

Hi Clapton,

I mean a fixed amount eg. £50, is often better than a percentage eg. 2% of outstanding debt.

The first will stay the same, and pay the debt off quicker; the second will decrease as the debt decreases, costing way more in the long run.

Dan

A fixed amount may of course be LESS than a percentaage .. it depends upon how much the balance.
e.g. if the balance is 10,000 then 2% of that is £200 but if you were paying only £50 that probably wouldn't even pay the monthly interest and the debt would actually be increasing.
So paying a fixed amount could be a disaster.

Katy_M_2

Hi all

I am a Barclaycard customer and I am pleased about this really.

As others have mentioned - Barclaycard clearly state on their statements and website that only paying the minimum monthly payment will mean it takes much longer to pay the debt off.

I have just moved into a new flat so the next couple of months are going to be tight. So it is handy for me to be able to pay of a smaller amount until I have more available funds and am in a situation where I can start paying off large chunks again.

I think it will help people to be able to budget better in these hard times, but there are always going to be people who don't handle their debts responsibily. Barclycard cannot be blamed for people's ignorance IMO.

Former_MSE_Dan

CLAPTON wrote: »

A fixed amount may of course be LESS than a percentaage .. it depends upon how much the balance.
e.g. if the balance is 10,000 then 2% of that is £200 but if you were paying only £50 that probably wouldn't even pay the monthly interest and the debt would actually be increasing.
So paying a fixed amount could be a disaster.

Yep that's right - the fixed payment should always cover at least the interest in the first month - we hadn't mentioned the size of any balance above.

In the full minimum payments guide, our general guidance is, if you can afford the minimum payment of, say, £75 in month 1, then instead of signing up to pay the Minimum, making a fixed payment of £75 (which you can afford), is a very sensible course to sail.

Dan

Katy_M_2

mitrant wrote: »

Personally, I've often thought that basic areas of "adult life" should be taught in secondary schools. Managing credit arrangements and the like could easily be incorporated into maths classes... but instead they choose to teach us stuff about when trains are going to pass each other... like I'm James Bond and need to know that...

I have said this to many people in the past. I'm 27 and I've only just got the hang of it all really....wish I knew 5 years ago and I would have no loan now and a mortgage on a lovely thatched cottage in the country and so on. I'm sure of it!

mitrant

Katy_M wrote: »

I have said this to many people in the past. I'm 27 and I've only just got the hang of it all really....wish I knew 5 years ago and I would have no loan now and a mortgage on a lovely thatched cottage in the country and so on. I'm sure of it!

Yeah, I think most people suffer financially after they've left education because they just don't really know how everything works... just think, trim some of the chaff from the curriculum and explain the ins and outs of credit, mortgages, income tax and all that stuff when someone's 15/16 and you could put a lot more people on a sound footing for the future.