Can someone help me understand what will happen when my 0% runs out?

DebtClearer

Hi guys, I currently have a £4000 virgin CC which 0% runs down at the end of the year. Let's say by end of the year I get this down to £3700 and the 16.8% interest kicks in will I still get to pay 1% of the balance after the interest has been added? ie option a)

a) £3700 + £51.8 = £3751.80 so I'd pay £37.51

or will I have to pay option b)

b) £37 + £51.80 = £88.80

Cycrow

are you talking about the minimum payment ?

usually the minimum payment at least covers the interest, so it'll most likly be interest + 1%

marty2be2000

it will be option B, the minimum payment will be at least the total interest added plus a percentage of the balance.

If the virgin card is 1% then you'll be paying £37 plus whatever the interest is, as a minimum.

DebtClearer

Thank you, it is worth knowing as the snowball accumulator doesn't take that in to account.

Interestingly though on some other cards I have that are 2.5% they just require 2.5% of the statement value inclusive of interest.

DebtClearer

why does my m&s card work differently?

[Deleted User]

DebtClearer wrote: »

why does my m&s card work differently?

Because it's not an MBNA card, so isn't subject to MBNA's terms and conditions?

pqrdef

DebtClearer wrote: »

Interestingly though on some other cards I have that are 2.5% they just require 2.5% of the statement value inclusive of interest.

That would be "just" around £94.

If they work it that way, it'll be more than 1% + interest.

You're paying 2.41% of the statement balance.

chattychappy

DebtClearer wrote: »

Interestingly though on some other cards I have that are 2.5% they just require 2.5% of the statement value inclusive of interest.

If the interest was more than 2.5% (35% APR), then because of regs they would have to require more. Perhaps their interest never goes that high!

DebtClearer

No 2.5% of the balance is the minimum payment. However M and S add the interest and ask you to pay 2.5% of the statement balance whereas MBNA obviously do it differently.

chattychappy

DebtClearer wrote: »

No 2.5% of the balance is the minimum payment.

There is no "no" about it. As I say, if the interest exceeds this then they must raise the minimum payment - this is in the lending code which they've all signed up to. By paying minimums, (without further spend), the balance must decline over time. So the minimum must be at least the interest charged.

And indeed it is in their T+Cs:

http://bank.marksandspencer.com/pdf/CCTC.pdf

"the minimum repayment, which is either the total interest and default charges together with 1% of the principal shown on your monthly statement or 2.5% of the outstanding balance shown on your monthly statement or £5, whichever of these amounts is highest."

DebtClearer

At the moment I have some interest on the M&S card and I end up paying 2.5% of the balance, that's all I know....