MSE News: Government steps up credit card crackdown

nomoneytoday

I think it's a fantastic idea. A 2% minimum payment is too low, as it doesn't clear the debt fast enough in my opinion. MSE Martin has previously shown examples whereby a debt takes 40 odd years to clear at minimum payment rates for example!

If finances are at a level where this makes a tipping size difference to household budgets then it sounds to me as though the credit card is being used wrongly. They are for convenience, Section 75 coverage, cashback and spreading purchases over short periods. (With the odd exception such as unplanned reduncancy and pregnancy etc)

NickX

No, No, No we don't want higher Minimum Payments :mad:

If people want to pay more than the Minimum then they have every right to do so, but I don't want to have to pay more than the current Minimum when those funds are earning interest elsewhere.

They really are not making life easy for the impoverished stoozer

thursday

jennihen wrote: »

My resolution is that, aside from not buying anything I can do without, I'm going to teach my children how to use credit effectively and only when needed, so they never get into the 'minmum repayment trap'
Credit is a tool just like a chainsaw!! Operate with caution!!!!!

cant agree more.
All new applications for unsecured credit should carry "beware: this is a new form of slavery" notice in bold, rather like "smoking kills"

petera74

The problem the average consumer for credit cards is having is simple!
The minimum payment mainly is made up of interest due to the Credit card.So no debt on the card ever gets paid!
For me. I have 3500 pounds of debt on a Virgin MBNA card. In Jan 2008 they changed my interest rate from 15.9% to 29.9%.
So I work out I can only pay about 100 pounds each month. Of which at 29.9% APR. 86 pounds is interest and 14 pounds is off the debt. So in a year of paying 100 a month, 1200 for the year. 1032 pounds is interest and 168 pounds is off the debt.
So in a year at 29.9% APR I would get the debt down to 3332 pounds.
If they left me at 15.9% which I signed up for and spent at that rate.
At paying 100 pounds a month for a year 1200 for the year. I would have paid 528 pounds in interest and 672 pounds of the debt.
So in a year I would at 15.9% APR I would get the debt down to 2828 pounds.
To me at a rate of 15.9% APR I have a chance at clearing the debt.
At 29.9% it is a lot harder to do.
This is were the credit card companys are clever, they know that if they leave the rate at 15.9% then the debt will be cleared at some point. At 29.9% they know that an average consumer will not be able to keep up at 29.9%. Therefore they are keeping money flowing in.
They need to be stopped ASAP with interest rate hikes.
If you go to MBNA credit cards and request all consumers with a debt higher that 3000 pounds, ask them what rate the consumers are on. You will be surpised at how many people are at 20% and over!
I would say 95% of consumers are in the same boat as me.

never-in-doubt

NickX wrote: »

No, No, No we don't want higher Minimum Payments :mad:

If people want to pay more than the Minimum then they have every right to do so, but I don't want to have to pay more than the current Minimum when those funds are earning interest elsewhere.

They really are not making life easy for the impoverished stoozer

Totally agree - at the end of the day irresponsible (or responsible rather) lending starts with the individual - do we really need the government holding our hands, I mean they are no role model really are they? :rotfl: :rotfl:

Perry525

When I opened this thread, I assumed that everyone would be in favour of the proposed tougher rules.
The solution must be that the proposed new interest levels and repayment minimums only apply to new borrowing.

nomoneytoday

petera74 wrote: »

Stuff

When the card companies put up the rate you can lock in the debt at the lower APR amount and cancel the card.

petera74

Hi nomoneytoday I was never offered such a deal! Can I still get this?

never-in-doubt

petera74 wrote: »

Hi nomoneytoday I was never offered such a deal! Can I still get this?

Sure if you never used the card!

Rules:

The lender writes and says we're increasing your apr. You refuse which means that the card cannot be used again and the balance must be paid (same as before, i.e. min payment or whatever you want) and the rate remains at the existing rate.

If you use the card then you auto qualify for the dearer interest rate. :T

bengal-stripe

petera74 wrote: »

The problem the average consumer for credit cards is having is simple!
I would say 95% of consumers are in the same boat as me.

I believe, some 2/3 of Credit Cards get paid in full.

Only a minority of consumers have CC debt problems and are in that same boat.