Warning - MBNA Rate For Life Credit Card

johnny_robinson

Hi Everyone,

Just a bit of a heads up if nothing else about the MBNA rate for life card.

Currently I have a personal loan with tesco at 8.8% fixed. The MBNA rate for life card looked a good option for me as it charges 5.9% interest and 1.5% handling fee so giving a total of 7.4%.

After contacting tesco for my early settlement figure and then working out the 7.4% of my early settlement figure it was quite clear that MBNA could save me around £200 for switching.

OK so I went to MBNA's websit and was just about to apply however the rate seemed way too good to be true so I called them and also used the online chat faciility. It turns out the rate thats advertised as being:

5.9% for the life of the transferred balance and no annual fee is not as straight forward as it first seems.

Basically they charge you 5.9% of whatever the balance on the card is each year.

To me that means that there is an annual fee of 5.95?! Correct?! They reckon not!

Just giving everyone a heads up incase you nearly do something I just very nearly done!

I will be reporting them to consumer direct tomorrow :-)

Johnathon

mynameisdave

Isn't that how most credit cards work?

johnny_robinson

mynameisdave wrote: »

Isn't that how most credit cards work?

When the website says no annual fee I would not expect to get charged 5.9% annually!

Johnathon

[Deleted User]

It's not an annual fee. It's an interest rate. It's 5.9% annual, charged daily.

johnny_robinson

Deleted_User wrote: »

It's not an annual fee. It's an interest rate. It's 5.9% annual, charged daily.

I still don't think the wording is clear on the website.

5.9% for life and 1.5% handling fee!

Johnathon

[Deleted User]

But that's what they're giving you. You pay a one off 1.5% handling fee. Then 5.9% is applied to the balance for life.

stephane_2

You simply don't know how credit cards interest works.....you got it all wrong

johnny_robinson

Deleted_User wrote: »

But that's what they're giving you. You pay a one off 1.5% handling fee. Then 5.9% is applied to the balance for life.

The 5.9% is not added to the balance for life.

The 5.9% is added to the balance each year for as long as the card has debt on it!

So for example:

I move over £4000 worth of debt. Straight away they add on 1.5% handling fee and 5.9% interest.

After 12 months say I have £2000 worth of debt on there they then work out 5.9% of that and add that onto the balance!

Johnathon

[Deleted User]

No. They charge a 1.5% handling fee. Then they charge 5.9% annually on your balance for life, calculated in small daily interest charges.

Take your current card. Let's say your rate is 18.9%. How do you think they charge that? You see an amount of interest each month on your balance, don't you?

YorkshireBoy

johnny_robinson wrote: »

The 5.9% is not added to the balance for life.

The 5.9% is added to the balance each year for as long as the card has debt on it!

So for example:

I move over £4000 worth of debt. Straight away they add on 1.5% handling fee and 5.9% interest.

After 12 months say I have £2000 worth of debt on there they then work out 5.9% of that and add that onto the balance!

Johnathon

Absolute nonsense!

You move £4K
They charge a fee of £60
You now owe £4,060

Each day you accrue interest on the debt (at the close of business each day) at the rate of:

closing balance x 5.75% / 365

(where 5.75% is the annual non-compounded rate, ie 12 x the monthly rate of 0.4789%)

The sum of these 30/31 days interest is the applied to your account on statement date and forms part of the new balance.

mynameisdave

Where is the incentive to pay back the money. They are a business and not a charity. THey make more money the longer you take to pay it back, you pay more interest the longer you take.

Its quite a fair deal, in reality. After all you are spending their money.