Barclaycard minimum payment increase

Hop75

Evening all

I could really do with some advice. I rang Barclaycard this afternoon simply to check my understanding of the new terms and conditions, which have been issued as a result of the new Consumer Credit legislation.

Essentially I was checking my understanding of Condition 2 'Change to your minimum monthly payments', only because I was struggling to see when this would ever come in to play - the new clause says that, instead of charging the minimum payment of 2.25%, Barclaycard would charge the sum of the interest plus 0.1% of the remaining balance if it results in a higher amount than the regular minimum payment .

Be that as it may, during what I expected would be a fairly routine conversation the lady I was speaking to proceeded to inform me that the minimum payment on my flexi rate card would increase from 2.25% to 5%, as of my 5 November statement.

Having spent 45 minutes on the phone to her and her line manager, I am now waiting for clarification on the above. They said the increase had not yet been applied but there was a notice on my account for it to be applied.

Can they do this? Granted, I am only making the minimum payment on the card and have done so for some time, but I can't ever remember having the minimum payment increased on any card I've ever held previously.

Aside from the fact that this will more than double my minimum payment, I am now concerned that other card providers may follow suit.

Surely the point of the new legislation is to protect existing cardholders from exactly this kind of thing? My understanding is that the new legislation (which I appreciate is being taken up voluntarily by card providers) should mean that minimum payments on existing cards stay at their current rate.

Cynically it seems that Barclaycard is planning on implementing the increase before the 26 November when the new terms and conditions kick in.

Any advice gratefully received.

Simon

ILW

Increased minimum payments benefit the customer in most cases. In effect protecting them from their own foolishness.

papalimabravo

A higher minimum payment means lower interest is charged to the customer over the long term (assuming you are being charged interest on the balance and only make the minimum payment).

emweaver

also means some who can only afford minimum payments fall behind especially if other card issuers follow which isnt helping cusomers at all

mjm3346

Can they do this? Granted, I am only making the minimum payment on the card and have done so for some time, but I can't ever remember having the minimum payment increased on any card I've ever held previously

Yes they can do it, minimum payment rates have varied before and will do again. As interest rates start to climb higher you can expect minimum payments to rise and don't be surprised to find cards stopping you from "drawing out" the surplus after the interest charge has been paid.

Paulgonnabedebtfree

If they all jack it up to 5%, they will end up getting next to nothing from me. That's not a choice either. They would be forcing bankruptcy, IVA, or DMP onto me. As things stand, my debt levels are dropping a few hundred pounds each month. Continue like this and eventually, everyone will be fully repaid and will have made a healthy profit from me by charging me interest at a higher rate than they borrow it. Force me to pay more than I can afford and I go under and they lose out too.
Their fear of a customer becoming insolvent becomes a self fulfilling prophecy. Everybody loses. Continue as things are and everybody wins.

mjm3346

Paulgonnabedebtfree wrote: »

Force me to pay more than I can afford and I go under and they lose out too.
Their fear of a customer becoming insolvent becomes a self fulfilling prophecy. Everybody loses.

Sadly that has never stopped them in the past, it's just like jacking the interest rate up on a mortage because it looks like someone has become a poor risk, that can then be enough to tip things over the edge and oh look they were right.

Paulgonnabedebtfree

mjm3346 wrote: »

Sadly that has never stopped them in the past, it's just like jacking the interest rate up on a mortage because it looks like someone has become a poor risk, that can then be enough to tip things over the edge and oh look they were right.

It sounds pretty stupid to me. At the moment, even allowing for interest, my unsecured debt level drops by about £500 a month. If they start to squeeze me for £1k a month, they get nothing. Idiots.

chattychappy

Hop75 wrote: »

Can they do this? Granted, I am only making the minimum payment on the card and have done so for some time, but I can't ever remember having the minimum payment increased on any card I've ever held previously.

Interesting question. The T+Cs generally allow them to - but T+Cs are not the be-all and end-all. Lenders have signed up to the "Lending Code" - I was wondering if there might be an "opt out" as there is with interest rate rises, but there isn't. But the Lending Code is simply an industry-driven initiative which is an attempt to come up with something that complies with FSA principled-based legislation. The FSA do require institutions to treat customers fairly - and if they fail to have the systems, controls and management in place then customers can complain to the Ombudsman.

I think it certainly would be unfair, if to take an extreme example, an institution made a special offer of "0% APR on balance transfers, 5% fee" and then after acceptance jacked the 2.25% minimum repayment up to 20%, say.

I'm sure it's very sensible to have minimums quoted by reference to interest charged - eg it will always be at least the interest plus £5 (I think I have that on MBNA). In the absence of this, to go from 2.25% to 5% could push people into defaulting. Quite unnecessary if the 2.25% was more than covering the interest and the balance was otherwise under control.

Yep, I think it's unfair and worth complaining about. Such a change should come with an opt-out or come much longer notice (so people can plan) or only apply to new spending (complicated to work out) IMHO.

Hop75

Bit of an update for anyone who's interested.

After Saturday's discussion with the lady at Barclaycard, I spoke to her line manager who promised to look into this and call me back today at 2pm. Being an inpatient sort I decided before lunch to call Barclaycard myself.

I spoke to a very helpful lady who confirmed a 5% increase in my APR, which I already knew about, but no increase in min monthly payment. And the penny dropped. Despite me being very careful to refer to the min monthly payment during my original conversation on Sat, it seems likely that the first lady I spoke to somehow got confused and was actually looking at the notification of the 5% APR increase and read it as an increase in min monthly payment to 5%.

To be absolutely certain about all of this, and having not received a call back from the team manager, I called Barclaycard a second time this afternoon and the person I spoke to again confirmed the 5% APR increase but no change to min monthly payment.

Needless to say I am much happier now that 48 hours ago, although I'm still slightly baffled, not to say alarmed, how the first lady got so mixed up.

I'll keep an even closer watch on my statements over the next couple of months than usual, but the other positive upshot in all of this for me is that I spent quite a lot of time reading other postings in the forum and it's actually been quite inspirational.

Consequently I now know exactly how much debt I have, literally to the nearest penny. It's been a relief too to know that many other people are in the same boat and that many of us, myself included, are making good progress. I've paid off a significant amount over the last two or three years and continue to do so. Funnily enough the Olympics seems to be a target, in terms of clearing debt, highlighted by many and it has been for me for some time now.

Keep your chin up.

chattychappy

OK, that makes sense.