Cheap way for MBNA to boost their profits?

strongeyecontact

Or reasonable business sense?

I'd welcome any opinions on a little vent I have, regarding a problem (for me!) I found out about today.

To try to keep this short, I did a balance transfer to an MBNA credit card a few months ago, with zero % interest. I know I should have known better but this money was invested in a property which is now profitable. I knew the interest rate went up in September, but wasn't worried because I have a DD set up to take the minimum required, and will be repaying the total within six months. Now bearing in mind this minimum payment is set by MBNA, I didn't think it was too outrageous to expect they would always take enough money - but no.

Checking the online banking system today, I found that a few weeks ago, MBNA had added over a hundred pounds in interest, which had taken me just over the credit limit on the account. A week or so before that, their minimum payment of £25 was nowhere near sufficient to cover this, so I now also get charged a further £12 for the over-limit fee (I haven't used the card since the balance transfer). This month's payment is nearly £150, which again is no problem, but my point is that the minimum payment should go up BEFORE the high interest starts to be added. I tend not to look at the paper statements, as I choose the DD option to take away the necessity for me to read everything which comes in - I just make sure no other debits have gone on to my account.

Their online sytem doesn't even show the amount of interest due to be taken next month, so there is no way for me to have known this was going to happen. Unless you have either Microsoft Money, or Quicken, you can't even download a statement. Their staff don't know how to use their own online system - today's highly unhelpful member of staff told me (during a complete waste of time 45 minute conversation, most of which I spent on hold) that he didn't even own a credit card, and certainly had no idea how the interest worked, so I now await a call from a manager, within the next 48 hours.

Is it unreasonable that, when I am relying on their automated system (ie a DD) to take the right and sufficient amount of money, having not used the card for months and always being well within the limit, their system actually takes enough money to ensure the interest THEY charge does not take me over my limit, and then when it does, get charged for the priviledge?!!

I did not underpay. I did not use the card. I DIDN'T make an EXTRA payment, which smug boy today tells me I should have, and because I didn't (as I didn't know I needed to), they charge me £12 and my credit file records an over-limit event. I offered to pay the whole amount today, and was told the best he could do was refund 50% of the fee, being £6, but still failed to completely see my point. What is the point of an automated system, if it doesn't keep you out of the red?

Opinions please

(I have now paid the over-limit amount, but am told the DD will still be taken in full, because it wouldn't have covered the over-limit amount - which is 100% their interest, which I always thought the DD had to cover? Confused...)

sweetstudent

Whats your point as if fail to see it? I have a American Express with MBNA and a recent balance transfer i know that the minimum payment is £25 i believe, which i am glad as it will enable the balance to be paid quicker.

melorablack

So you don't think the minimum payment they are asking for is enough? Jjust pay them more then.......:rolleyes:

strongeyecontact

Sorry, as you can see I have now put the whole post up, it should make more sense! It isn't what I think, just, what is the point of setting up a DD if it doesn't take enough?

dmg24

Can you summarise your post please - you don't seem to get to the point?

geordie_joe

Well, this is what I think happened. But my figures are entirely made up and just used to illustrate the problem.

The OP has a credit card with a limit of £1,000

He has £990 balance on the card

MBNA set the minimum payment at £25

They take a payment of £25 by DD

then add on £40 interest

This results in his balance going up to £1,005

They then charge him for going over the limit.

His gripe is why didn't they take another £5 to keep him under the limit.

I may be wrong, but that's how I read it.

strongeyecontact

:rolleyes: Thanks for your very concise summary, you have nearly got the gist of it - I should have done a summary like that!

Actually I was nowhere near that close to the limit, I had been merrily paying the £25 payment MBNA set, by DD, then when the interest went up, they put an amount of nearly SIX times this on to the account, in interest, which took me just over the limit. And also charged me £12.

They have that month increased the minimum amount to cover this increased interest, plus about £20 to reduce the balance a tiny bit - but they do it the wrong way round in my opinion, because this doesn't come out until a couple of weeks later! I am therefore over the credit limit, because of their interest, for the couple of weeks until the first increased DD comes out.

My gripe is that it should be the other way around, the DD should always take enough to cover the interest, PRIOR to that interest coming out - or at the very least the online system should warn you by saying what the interest is going to be next month, but it doesn't, anywhere.

It just seems to me to be a way to get an extra fee out of you, even though I called to immediately get the balance down when I saw what had happened. As I said, the DD due to come out this month also wouldn't have covered this over-limit amount, which just seems to be wrong to me. Why set up the system to take payments which aren't enough to cover their own interest, is my point (albeit long-winded)? What is the point of having an automated system, if you also HAVE to make extra payments, as I was told today? It doesn't make sense.

Sorry the posts are so long, as the board name implies, they are vents!

dmg24

I think I know what you are saying now, but summaries are definitely good!

What you have described is pretty standard I'm afraid. It works on the same principles with balance transfers - you may have a £1000 limit, but you need to ensure that you account for the balance transfer fee within that amount.

It is annoying, but take it as a learning experience - you will remember this, and you'll ensure it doesn't happen again. If you look at it this way, it could save you money in the long run!

strongeyecontact

Thanks for your reply. It may well be current standard practice, but that doesn't make it right!

I also don't agree it's the same as allowing for fees on balance transfers, because actually the bank won't let you take all of your limit on a transfer - they allow for the transfer fee going on and then some extra too, so you can't be caught out this way.

Apart from having a vent, I though this website was all about getting sharp practices, which trap consumers into paying unnecessary costs, altered to become more transparent and user-friendly? I agree education is worthwhile, but if banks weren't so underhand it wouldn't be necessary. I am more financially clued-up than a lot of people, and this just doesn't make sense to me

Laz123

I tore up my MBNA card and returned it with a furious letter. They kept on sending those cheques every month, you know the ones which start adding a high interest rate as soon as you use them, with no 30 days credit.

I wrote twice beforehand to ask them to stop this bad banking practice, but they ignored me. I told them, considering the econimical and financial mess that the banking industry has brought the entire world to its knees they should be more responsible. So they can stick their bank up their rear port.

JimmyTheWig

I can't get the numbers to work, unless your credit limit was huge?
Normally there's a maximum percentage of your limit that you're allowed to transfer. I can't understand how this, coupled with the £25 monthly repayments during the 0% deal, wasn't enough to cover the first (partial) month's interest?