MSE News: Credit card promo period prompts among solutions for tackling persistent de

The FCA is proposing doing more to signal the end of promotional periods in its final credit card report...
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'Credit card promo period prompts among solutions for tackling persistent debt'
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  • jamesd
    jamesd Posts: 26,103 Forumite
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    edited 27 July 2016 at 11:17AM
    The FCA's final report is available here.

    Sad to see that they are considering increasing the amount of interest I'll pay by increasing minimum payments. Ditto for anyone trying to pay off the most expensive cards first who ends up compelled to pay more off cheaper balances.

    Added later: the current requirement is at least "Interest and charges plus 1% of the outstanding balance" and I'd like to see that 1% eliminated as a way for me and other consumers to reduce costs. Actual costs, not lower repayments but more interest to pay. The lower the repayment the cheaper things are for me.
  • molerat
    molerat Posts: 31,818 Forumite
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    I find it appalling that promo end dates do not appear on many statements. My MBNA and Santander show them clearly but TSB makes no mention of any promo simply stating 0% interest, in fact I have nothing in writing stating my exact promo end date.
  • By upping minimum payments there is potentially a situation where somebody can't afford to make them - that is, afterall, presumably why they are paying the minimum as it is. Especially if they have debts on multiple cards.

    For those that have promo offers on their cards, higher minimum payments will hit profit too.

    I think the "If you keep paying the minimum payment it will take X Years/Months and cost you £XXXX at the current interest rate & balance" is more than enough
  • jamesd
    jamesd Posts: 26,103 Forumite
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    By upping minimum payments there is potentially a situation where somebody can't afford to make them - that is, afterall, presumably why they are paying the minimum as it is. Especially if they have debts on multiple cards.
    It may simply be that they are being sensible and paying more than the minimum on the most expensive card and minimum on the rest.

    For that sort of reason the lowest possible minimum payments are useful. Just barely enough to cover interest and charges, say.

    But beyond that there is perhaps merit in two features:

    1. "standard payment" set at a level above the minimum and being the default amount to pay with minimum an optional one. Perhaps at a level sufficient to clear the whole credit limit amount in ten years. Not the actual balance in ten years because that would reduce every month so it's always ten years away.
    2. minimum payment plus x with the customer saying what x is. Could be minimum plus £10 or £0.01.

    Those make it easy to pay more but still allow those who have a reason to do it to cut back on one or more cards to use the money for other things, like more costly cards.
  • jamesd
    jamesd Posts: 26,103 Forumite
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    edited 27 July 2016 at 11:15AM
    molerat wrote: »
    I find it appalling that promo end dates do not appear on many statements. My MBNA and Santander show them clearly but TSB makes no mention of any promo simply stating 0% interest, in fact I have nothing in writing stating my exact promo end date.
    Agreed, though it is interesting to see:

    "7.13 Some industry respondents emphasised that existing codes of practice, such as the Lending Code, already require them to give notification four to eight weeks before the end of the promotional offer, which they considered sufficient.
    ...
    7.14 We remain of the view that there is value in reminding consumers before the expiry of their promotional offer to encourage them to (a) be aware of the interest they may incur and (b) to consider if the card still meets their needs and, if not, shop around and switch"

    I agree with you that on-statement details are helpful in both planning and other aspects of managing debt.
  • jamesd
    jamesd Posts: 26,103 Forumite
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    It's very worrying that the FCA is considering "8.17 ... the removal of the minimum repayment amount as a pre-set option".

    This would mean that customers who are seeking to minimise their borrowing costs would be at increased risk of breaching their agreements, paying penalties and having their credit ratings and access to lower cost credit harmed by not making the required minimum repayment, since every month they would need to themselves change the amount required and this is less reliable than having this taken care of automatically and any extra done as appropriate.

    The FCA appears here to have an excessive focus on those with problems rather than those without problems who would be harmed and pay the costs of this measure.
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