Charges more the minimum payment - can they do that?

ehelps

My fella spent over over his credit limit so he has around £1300 on a card where the limit was £1200

Each month they charge him £22 interest and £12 for being over the limit, so the total charges are £34. The minimum payment (paid by direct debit) is £30, so he'll never repay it!!

Now I know he's daft for not paying more than the minimum payment & getting it down below £1200 - and he will do now, but can they even do that? Keep charging more than they take? Shouldn't they reduce/freeze the charges or up the minimum payment?

He's cut the card up so other than interest & charges there isn't anything else being added

PeacefulWaters

He's an idiot. Trade him in.

He has the choice of paying more. The minimum payment is not the only option. He has control if he wants it.

He has the choice of protecting his credit file and getting back under the limit. This would also save him £144 a year in fees.

Why would somebody choose to be so stupid?

can they even do that? Keep charging more than they take?

It depends on the T&Cs. Older accounts yes. Newer accounts not.

Shouldn't they reduce/freeze the charges or up the minimum payment?

No. The card holder should pay more.

grumbler

Check the T&C and the statements.
Normally min payment has to be bigger than the interest and charges already debited when the statement is produced.

jonesMUFCforever

Are you sure that he has not requested a d/d for a SET amount and not minimum payment?
If so it is up to him to pay more manually.

Kahlehl

As of January 2011 all lending companies must ensure that the minimum payment is at least £5 greater than the charges applied or 1% of the balance which ever is greatest.

That is not to say that they cannot make it £10 above or 2% of the balance but it cannot be less.

Get him to contact the credit card company immediately and tell them you wish to open a complaint. Make sure that you ask the provider about their complaints procedure and ensure that you keep track of the dates and info that you have been given and who you have spoken to.
I believe that they are allowed to take a maximum of 8 weeks to get back to you (don't quote me on this!) and if they don't satisfy your complaint you can then take it to the ombudsman.
They will likely try and fob you off with some excuse about how the interest is spread out over the months due to each month varying in length but this is very unlikely to be true as most credit card companies calculate interest at a daily rate meaning that the length of the month has already been accounted for.
Be strong and stick to your guns. If you feel unsure about the reason they have given tell them you wish to keep the complaint open while you take some time to look into what they have explained to you. (Just as they will make you wait while they investigate your query)

I am currently in the process of fighting my own credit card provider for this and had been a little unaware due to the fact that my card is paid by direct debit and I scan my statement for unexpected charges not what amounts. (My mistake!! And a big one at that!!) also on the point of direct debits you can set either a fixed amount that is greater than the minimum payment but it cannot be less than the minimum payment. So as happened to me my direct debit was set at £100 per month and the minimum payment was £48 then as I spent on the card my direct debit increased to cover the minimum payment.

In 2013 I actually only paid back £4.55 of my credit card in that year! Whilst on hold to my provider I added up the payment made in each of the months and deducted any charges applied by the credit card company (interest, late payment/over limit fees). I actually should have paid back a minimum of £60!!

grumbler

Kahlehl wrote: »

... also on the point of direct debits you can set either a fixed amount that is greater than the minimum payment but it cannot be less than the minimum payment. So as happened to me my direct debit was set at £100 per month and the minimum payment was £48 then as I spent on the card my direct debit increased to cover the minimum payment.

Are you saying that the fixed amount DD increased automatically? I don't think this is true/correct.

YorkshireBoy

grumbler wrote: »

Are you saying that the fixed amount DD increased automatically? I don't think this is true/correct.

It is correct grumbler, but not without notification via the statement.

ehelps

Thanks all. He's paid a chunk off now so no more charges for being over his limit, will complain as suggested as they set the min payment & DD amount & should have increased it to cover the charges & the tiniest bit of capital. He actually owes more than he did a year ago when he incurred the debt in the first place!!

chrisw99

My wife for years has had payment to her credit card not via direct debit, but as a standing order from her bank account to her credit card.

So long in fact, that we'd forgot it was not a minimum payment direct debit just a manual fixed amount.

Until last month when her minimum payment crept above that fixed amount, and she got a late free and a demand for arrears of a few quid.

YorkshireBoy

ehelps wrote: »

Thanks all. He's paid a chunk off now so no more charges for being over his limit, will complain as suggested as they set the min payment & DD amount & should have increased it to cover the charges & the tiniest bit of capital. He actually owes more than he did a year ago when he incurred the debt in the first place!!

If he takes a look at his T&Cs he'll almost certainly find that he's expected to bring the account back under the credit limit by an additional payment outside the scope of the DD.


Having said that, most min payment calculations these days say something along the lines of:


"1% of the balance plus default fees and changes plus interest"


Which specific card is it?