Is this right what MBNA are doing?

vbrindle

I know someone who has a card with them and they put the interest rate up to 34.9% This is bad enough but the minimum payment isn't covering the interest, they take a minimum payment of interest + £5 out by direct debit. The card isn't being used, the minimum payment is being paid every month but the balance is actually going up. Do you think this is right or even legal? From all the years of using credit cards I've known the minimum payment can barely dent the debt because of the interest but for the balance to actually go up is insane. The minimum payment should always cover the interest as long as you don't spend on the card. What are your views?

marksoton

Prioritise the debt and pay more off ?

vbrindle

That's not my point. Other credit card providers make the minimum payment a percentage of the debt. The debt goes down if you don't use it and let the minimum payment come out by direct debit, slowly but surely. But with MBNA it is going up not down which is surely wrong.

marksoton

It's exactly the point. If MBNA are acting within the T&C's then your " friend " should have chosen another provider if they were going to max the card out and only be able to make minimum payments.

Extant

It's perfectly legal. There's a lot of talk in the press about stopping it, as the American government have done, but to date that hasn't happened.

vbrindle

marksoton You are not very helpful so why bother replying. My "friend" is actually a relative of mine. The T & C have changed since they took the card out. In fact they seem to change the T & C every 5 mins. The fact still stands that if you make the minimum payment you do not expect the balance to have gone up the following month.

CLAPTON

The matter is currently being discussedd by the FSA and doubleless will be addressed
Whether it's wrong or right it's currently legal and not against any regulation.

Now your relative knows about the situation she/he should pay whatever they feel is right and proper.

Personally I think that the minimum payment should be at least 10% of the balance as CC should not be for long term borrowing and I commend this suggestion to your relative.

hax_2

vbrindle is right.

The Banking Code requires that, each month, the minimum repayment you have to pay must be more than the amount of interest charged.

Obtained from:

http://www.choosingandusing.com/terms_conditions/minimum_repayment.html

dfh

hax wrote: »

vbrindle is right.

The Banking Code requires that, each month, the minimum repayment you have to pay must be more than the amount of interest charged.

Obtained from:

http://www.choosingandusing.com/terms_conditions/minimum_repayment.html

Good post.

YorkshireBoy

hax wrote: »

The Banking Code requires that, each month, the minimum repayment you have to pay must be more than the amount of interest charged.

And it is more...a fiver more according to the OP.

Are there other factors in play here? PPI, £12 charges, etc that are causing the balance to increase?

vbrindle

YorkshireBoy wrote: »

And it is more...a fiver more according to the OP.

Are there other factors in play here? PPI, £12 charges, etc that are causing the balance to increase?

Nothing other than the shoddy 34.9% interest