Minimum Payments on Credit Cards

Lindylou54

Last November I took out a Virgin Credit Card which stipulated that I had to repay 2.5% of what I owed per month, however after the first month, the minimum payment was £5. Initially I paid off £100 plus per month, until I started throwing all possible funds to a MBNA credit card to pay it off.

However, I am now looking to balance transfer the amount on the Virgin card to another 0% interest, but am worried that as most cards are insisting on 3% payback per month, this will take the payments up to a level I may struggle with.

Why do companies say you must repay say 2.5% then only charge the minimum of £5?

Any ideas?

This is my first post so please excuse me if I am being dumb!

KTF

From memory its normally 2.5% or £5 (whichever is the least) that has to be paid each month.

gingercordial

The MBNA cards (of which Virgin is one) are the only ones who have a payment of however many % or £5, whichever is LOWER. Unfortunately most other cards are x% or £5, whichever is HIGHER (obviously if your balance is lower than £5 you only pay your balance). So I'm afraid any other credit card you get is going to be somewhere between 2-3% of the balance every month. And sadly they won't let you get another MBNA card to transfer the balance to.

However, when my Virgin deal finished I phoned up and asked them if they could do me another 0% deal; they ended up giving me 0.9% for 6 months so maybe that would help your situation.

King_Of_Fools

KTF wrote:

From memory its normally 2.5% or £5 (whichever is the least) that has to be paid each month.

This is only true for the Virgin card (and othe MBNA cards?).

All other companies want around 2.5% or £5 (whichever is the greatest).

YorkshireBoy

The Virgin minimum payments are...

The lesser of:

• 2.25% of your balance (min. £5) or
• charges for Payment Protection Cover plus interest and fees, plus £5 or
• your balance, if it's under £5.

The MBNA family are unique in their £5 minimum payments. If the idea of 3% minimum payments worries you, then there are plenty of cards around still charging 2%, although you may have to pay a BT fee whichever way you go.

I'm sure I don't need to tell you this, but only ever paying the minimum amount will mean that the debt will take many years to repay, and you will pay significantly more interest.

I'd suggest setting up a DD for the minimum payment, and then making additional one-off payments as and when you can afford it. Use the calculators at https://www.whatsthecost.com to see the effect that increasing your payment amount has on the time taken to clear the balance.

Lindylou54

I might have to try your tactic and see if they offer me another deal, however in the meantime I have got a Macmillan cancer card, for almost all of the balance with no bt fee, which I can use if that fails, however it is at 3% per month payback, which I can manage but would be a struggle

nomoneytoday

If you have issues paying back the minimum payments I would suggest looking at the debt free forum below this one..

david_hellier

Funnily enough in the good old days it used to be 5%, then it seemed to drop to 3%, now it's 2.5%!

Any way if you borrow £1000 and pay 3% of per month, assuming say 15% APR you will pay about £350 in interest and it will take about 20 years to get to a balance below £100. What they don't tell you.

CTT_2

I balanced transferred an amount of £5,000 to my Barclaycard which was partly to furnish my new card. They offered me 2.9 percent for the life of balance. It is now down to £3000 but the interest is only about £7.00 per month so I am happy to keep this amount on the card. Also the min payment is 2 percent but give them a fixed amount of £112 each month.

wiggers

I think the minimum payment should be 5% of the balance plus the interest, in order to prevent the CC companies milking people for decades. In any case, I don't undertand why anyone would not want to pay off these cards every month. When I got my first card in 1978 it was blindingly obvious that having long-term debt on these accounts was a very Bad Thing.

---lee---

wiggers wrote:

In any case, I don't undertand why anyone would not want to pay off these cards every month.

Some people use 0% cards as an interest free loan. On that basis, the smaller the monthly repayment the better as it means you can have the money invested elsewhere and earning interest. Hope that makes sense.