Minimum Payment

ElkyElky

If you pay only the minimum payment towards a credit card statement, it will be reported to the credit reference agencies as being the minimum payment.

Does this have any negative impact on your credit file?

I have never paid only just the minimum payment but have noticed there is a column on the credit report stating whether its minimum or not.

CannyJock

Interesting debate this. The additional detail is supposed to help the credit providers assess you from a risk point of view.

In my opinion it's allowing them to streamline for profitability.

Otherwise, why would it also report whether it was a promotional balance?

It does allow card providers to identify rate tarts and stoozers. How big an impact this makes on their decision making process isn't clear.

I always make the minimum payment on my stoozed cards and make full payments on my other cards so aside from their merchant fees and the joy of having me as a customer they don't get much else from me.

So if risk was the driver, my last couple of slow-stooze applications should have gone through and I should have received very generous limits. But in both cases I've had to send additional information before getting very modest limits.

Because profit is the driver - if you're paying minimum payments (which they can see) and there's not a promotion running (which they can see) - then you're potentially a valuable customer for them.

ElkyElky

Interesting.

I assumed however, if you are paying the minimum payment only.. that could be perceived as you struggling with the debt.

Someone who pays 4-5x more than the minimum payment shows that they can afford the debt and aren't over-stretched - compared to someone paying the actual amount shown on the statement and not a penny more.

NickX

ElkyElky wrote: »

I assumed however, if you are paying the minimum payment only.. that could be perceived as you struggling with the debt.

Correct, however they are also reporting whether the customer is on a promotional deal. This means they can suss the stoozers out from those who are in financial hardship.

I am not at all happy about this additional information being shared, they have enough now to work out if you are a tart or a stoozer and once they have their computer software in place I suspect we will see more experienced Credit Card users getting rejected :mad:

CannyJock

ElkyElky wrote: »

Someone who pays 4-5x more than the minimum payment shows that they can afford the debt and aren't over-stretched - compared to someone paying the actual amount shown on the statement and not a penny more.

Here's what one of my cards shows when this was introduced:


Cash Advance:___ 0 _0 _0 _0 _0 _0 _0 .. .. .. .. ..
Advance Amount: £0 £0 £0 £0 £0 £0 £0 .. .. .. .. ..
Payment Code: ____________________ M .. .. .. .. ..
Promotional Rate: N _N _N _N _N _N Y .. .. .. .. ..

The "last" month they show was when I made the last minimum payment and the balance had a promotional rate.

The month after, I cleared the card in full.

So the "M" flag in the payment code shows you made a minimum payment.

If you're concerned about showing these M's then you only need to pay £1 more than the minimum

anniecatz

I used to work at lloyds in credit card services- evil, evil job, my apologies! as fas as i was aware it doesn't affect your credit rating if you just pay the minimum, only if you don't and it's easy to up the credit rating by just paying off more occasionally. People who paid off more were generally penalised in other ways, because they weren't paying as much interest as those paying minumum repayments.

CannyJock

anniecatz wrote: »

I used to work at lloyds in credit card services- evil, evil job, my apologies! as fas as i was aware it doesn't affect your credit rating if you just pay the minimum, only if you don't and it's easy to up the credit rating by just paying off more occasionally. People who paid off more were generally penalised in other ways, because they weren't paying as much interest as those paying minumum repayments.

Interesting, care to elaborate on the sort of penalties?

How do you see the new reporting system being used by the card companies for assessing applications and credit limits?

PNPSUKNET

I think what they are saying is that banks will decline you for 0% deals etc as they wont be making any money so why should they lend to you ?

td_007

CannyJock wrote: »

So the "M" flag in the payment code shows you made a minimum payment.

If you're concerned about showing these M's then you only need to pay £1 more than the minimum

Not sure if that will help. The equifax report that I got reports in addition to a box for minimum payment and promotional rate:
Credit Limit
Statement balance
Payment amount

Which means even if one pays £1 more than the min payment, the actual amount will be still be seen in the "payment amount" box and then it is easy to calculate the status versus the "statement balance" box.

All in all, with this information it now becomes possible to separate "stoozers", "strugglers" and "clearers" and the cc companies have one more tool to pick and choose their customers.

td_007

PNPSUKNET wrote: »

I think what they are saying is that banks will decline you for 0% deals etc as they wont be making any money so why should they lend to you ?

It is always balancing the risks. For a card company they need to have a subset of people who they are minimum risk (will clear their card), spend big (merchant fees even if they clear their card every month), who are medium risk i.e. can afford to make min payments, high risk who struggle to make min payments so increased income from default charges etc. With the detailed information that cc companies have at their disposal, they are now able to get the mix of customers that they feel will balance their risk and profit.

CannyJock

PNPSUKNET wrote: »

I think what they are saying is that banks will decline you for 0% deals etc as they wont be making any money so why should they lend to you ?

Possibly, but I don't pay any interest on cards, but this hasn't stopped me getting repeat 0% deals with some of the more generous card providers. Some cards nobody gets repeats on, that's fine you just cancel and reapply later.