PayPal Credit - not paying enough?

beelzebomb

I’ve just had this unexpected and surprising email from PayPal saying:

“We've noticed that over the past 18 months, you've paid more in interest, fees and charges than you have towards repaying the principal, which is the amount you borrowed. We want to make sure you understand the effects of paying less than the principal and the benefits of increasing the payments you're making.”

Has anyone else had this? How is this situation possible? I haven’t missed a single payment in a year. 2 have been late incurring a fee, and mostly I pay the minimum required, very occasionally slightly more than the minimum requirement.

[Deleted User]

If you're only paying the minimum on an interest bearing balance, it's very likely that you'll pay more in interest than you pay off the principle.

If you're getting late fees on top of that, it's pretty much a certainty.

boo_star

Making minimum payments almost always means your debt will be repaid very slowly and you'll fall into the category of "persistent debt" where the lender is required to send your letters/emails informing you about this.

Can you not pay more than the minimum? Only paying the minimum is not a smart idea.

beelzebomb

I’ve only had 2 late fees and have paid more than minimum on a few occasions but never missed (or ‘skipped’ a month) payment. The email is implying payments are not actually having any effect on decreasing the balance, yet I can see the balance decreasing.

[Deleted User]

Of course it's decreasing. It's a legal requirement.

That's not what they're saying. They're telling you you're paying more in interest and fees than on the capital.

mjm3346

You could have, for example, paid £100 off the balance but £200 in charges/interest, if what you paid in charges and interest was even 1p more than what came off the balance you should be informed

Kentish_Dave

You have to wonder what the point is in making it a requirement to inform customers if the ones affected then don’t then understand the information.

sourcrates

beelzebomb wrote: »

I’ve just had this unexpected and surprising email from PayPal saying:

“We've noticed that over the past 18 months, you've paid more in interest, fees and charges than you have towards repaying the principal, which is the amount you borrowed. We want to make sure you understand the effects of paying less than the principal and the benefits of increasing the payments you're making.”

Has anyone else had this? How is this situation possible? I haven’t missed a single payment in a year. 2 have been late incurring a fee, and mostly I pay the minimum required, very occasionally slightly more than the minimum requirement.

Its all to do with recent FCA guidelines, see here :


https://www.fca.org.uk/news/press-releases/new-credit-card-rules-introduced-fca


People who only pay the minimum monthly payment are at risk of getting into problem debt simply because the min payment usually covers just the interest, and a tiny proportion of the capital amount borrowed.

So the debt will take you longer to pay back, especially if you get charges added on top, by slightly increasing your monthly payments, even by just a few pounds, can help you avoid this happening.

sourcrates

Kentish_Dave wrote: »

You have to wonder what the point is in making it a requirement to inform customers if the ones affected then don’t then understand the information.

Lots of people drive cars, not all of them know how they work.