MSE News: Govt credit card crackdown – MSE submission: Editorial comment

edited 19 January 2010 at 3:46PM in Credit Cards
12 replies 2.6K views
Former_MSE_NatashaFormer_MSE_Natasha Former MSE
672 Posts
edited 19 January 2010 at 3:46PM in Credit Cards
This is the discussion thread for the following MSE News Story:

"Credit card stealth charges have been damaging consumers for years. Yet now the Government's given an opportunity for change, and MoneySavingExpert.com has published its reply to the consultation..."

Read the full stories on this issue:
Govt credit card crackdown – MSE submission

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  • Excellent well done MSE.

    I hope lots of site users have also contributed individually - its not often you get to input directly into something that affects us all so much - so if you havent yet go to the BIS site and have YOUR say too !
    LegalBeagles
  • I would be for minimum payment hikes, but only on new agreements! I agree totally to do it on existing cards will end up with people having defaults as they budgeted for the current minimum payments based on there current commitments.

    I love the idea of stating the time it takes to pay off, and interest earned. A nudge is all some people need.

    I am a very anti-credit person except for mortgages, but everyone manages there finances differently.
    Although no trees were harmed during the creation of this post, a large number of electrons were greatly inconvenienced.

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  • Premier_2Premier_2 Forumite
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    It appears there are still some cards where minimum payments do not even cover the interest charged.

    Here's an example.
    http://forums.moneysavingexpert.com/showthread.html?t=2214663

    I'm not sure supporting such practise that allows borrowers to get into ever spiralling debts is for their best.
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  • td_007td_007 Forumite
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    A blanket ban on increasing min repayment is not the right step forward - a low minimum repayment give a false sense of level of debt a person is in. However, consideration should be given to existing borrowers.

    A similar strategy to the option of freezing the interest rate and closing the card on clearing the balance if the consumer is unwilling to accept an increased interest rate can be used.

    Minimum repayment percentage for existing borrowers should be raised to minimum of 10-20% of the balance and customers unwilling to accept the new min repayment rate, should be given the option to freeze the min repayment rate they are presently on and then close the account once the balance has been paid off. For all new agreements, higher min payments should be compulsory. Amex already has 10% min repayment rate - this should be an example for others.
  • edgexedgex Forumite
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    Premier wrote: »
    It appears there are still some cards where minimum payments do not even cover the interest charged.

    Here's an example.
    http://forums.moneysavingexpert.com/showthread.html?t=2214663

    I'm not sure supporting such practise that allows borrowers to get into ever spiralling debts is for their best.


    precisely


    from the article:
    "new 'recommended repayment level' to clear debt within 3 years"

    credit cards should be short-term debt, not medium to long-term
    ideally the debt should be cleared within 12-24 months

    if that means minimum repayments have to go up, they go up.
    i really cannot see what the problem is with that


    "Allocation of repayments must be proportionate"

    what if the interest charges on the different types of debt on the card had to all be the same?
    & all the charging had to start at the same point in time?
    then it wouldnt matter what was getting paid down first, as it would all be costing the same.
  • edited 19 January 2010 at 9:36PM
    CannyJockCannyJock Forumite
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    edited 19 January 2010 at 9:36PM
    edgex wrote: »
    "new 'recommended repayment level' to clear debt within 3 years"

    credit cards should be short-term debt, not medium to long-term
    ideally the debt should be cleared within 12-24 months

    if that means minimum repayments have to go up, they go up.
    i really cannot see what the problem is with that

    For those with low APR LOB deals or on 0% promotions, increased mandatory minimum repayments makes affordability a problem. Some of the best and worst cards are from the MBNA stable.

    Good points: Long 0% promotions, low 1% minimum repayments, reasonably generous credit limits, ability to transfer credit limits between products
    Bad points: 1% min repayment doesn't include interest, APR hikes prior to end of 0% promotion, marketing aimed at promoting spending

    Low minimum payments should still be available to help with affordability. The article's option of recommended payments would be an extra option from my reading.
    "A child of five could understand this. Fetch me a child of five." - Groucho Marx
  • MSE_MartinMSE_Martin MoneySaving Expert
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    CannyJock wrote: »
    Low minimum payments should still be available to help with affordability. The article's option of recommended payments would be an extra option from my reading.

    Thats correct in our submission we recommend and enforced menu of repayment options each explained in real terms so people can see the impact they'd be

    The Min Repay
    The Recommended Repay
    Fixed Value Repay (e.g. £200 - or the min whichevers higher)
    Repay in full
    Martin Lewis, Money Saving Expert.
    Please note, answers don't constitute financial advice, it is based on generalised journalistic research. Always ensure any decision is made with regards to your own individual circumstance.
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  • The promise of new rules is already bringing the greedy banks out
    with increases ahead of them. Halifax letter today 5% increase no offer of options to close and repay at old rate etc.
  • izoolsizools Forumite
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    The promise of new rules is already bringing the greedy banks out
    with increases ahead of them. Halifax letter today 5% increase no offer of options to close and repay at old rate etc.

    Doesn't matter if they don't openly offer it, if you call them within 30 days of the letter requesting it they have to comply by law.
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  • edgexedgex Forumite
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    MSE_Martin wrote: »
    Thats correct in our submission we recommend and enforced menu of repayment options each explained in real terms so people can see the impact they'd be

    The Min Repay
    The Recommended Repay
    Fixed Value Repay (e.g. £200 - or the min whichevers higher)
    Repay in full


    its all very well 'showing' people what impacts different payments would have, but what if the low minimum payment isnt a good thing to be doing in the first place?
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