Merchandise Interest really high

greggo1410

I've not spent anything on a credit card for about 6 months but have recently started being charged Merchandise Interest on the credit card.

I currently pay about £100 a month off the Credit Card and then £60 gets taken from that 100 as Merchandise Interest meaning I'm effectively only taking £40 a month off a credit card.

This seems really high and I don't know what to do.

molerat

What is "Merchandise interest" ?  

Is this an interest free card that has come to end of offer ?  

What is the outstanding balance and what is the interest rate ?

What card is it ?

What to do  - pay more off.

DullGreyGuy

greggo1410 said:

I've not spent anything on a credit card for about 6 months but have recently started being charged Merchandise Interest on the credit card.

I currently pay about £100 a month off the Credit Card and then £60 gets taken from that 100 as Merchandise Interest meaning I'm effectively only taking £40 a month off a credit card.

This seems really high and I don't know what to do.

So the important thing you have missed off is that you have an outstanding balance?

Yes, credit cards have a high interest rate, where as a good rate on a loan right now is about 5% on a credit card you will struggle to find any under 20% and most are around 25-30% these days and the sub-prime will be over 35%

What to do? Ideally pay it off in full. If you can't afford that pay off as much as you can, anything over the £100 you are paying will purely go on the capital and not interest. 

If you have a good credit history you could look at a balance transfer card to get it onto 0% APR again for a short while and then make sure you pay off as much as you can each month so if its not paid off by the end of the 0% period the interest will be much lower.

greggo1410

So it seems that the Merchandise Interest is the Interest Rate.
It's just badly written on Nationwide as it does not show a percentage on the app.
I cant simply up my payments as I can't afford to pay any more than what I am.

CliveOfIndia

If you've been carrying a balance on the card, and have only recently started to be charged interest, then the most likely reason is - as mentioned above - you were on a 0% promotional rate which has now expired.  That being the case, you'll now be charged interest at the card's standard APR - which is usually fairly high for most cards.

In terms of what you can do - either pay off the balance, or else see if you're eligible for a Balance Transfer to a lower (or zero) rate of interest on a different card.  If you do go down this route, be aware that you must put money aside to repay the remaining balance when that card's promotion rate expires.  You can't just assume you'll be able to do another BT when the time comes.

greggo1410

I'm already paying the maximum i can afford now. 

Would it be better to get a loan to pay it off in full? 

DullGreyGuy

greggo1410 said:

So it seems that the Merchandise Interest is the Interest Rate.
It's just badly written on Nationwide as it does not show a percentage on the app.
I cant simply up my payments as I can't afford to pay any more than what I am.

I suspect the "merchandise" is meant to tell you this is the rate for purchase of products or services, ie where you have paid a merchant.  The standard NW is 24.9% so fairly normal. 

If you were to take a cash advance or a "cash like transaction" (eg buying foreign currency) then you would be charged an additional fee and get no interest free period. Some banks also charge a higher interest rate but that doesnt appear to be the case for NW

If you cannot afford more then you need to look at the possibilities of a Balance Transfer card or Loan to lower the APR however if your at your limits its fairly unlikely you will be accepted or at least accepted with a decent APR or limit. 

greggo1410

DullGreyGuy said:

greggo1410 said:

So it seems that the Merchandise Interest is the Interest Rate.
It's just badly written on Nationwide as it does not show a percentage on the app.
I cant simply up my payments as I can't afford to pay any more than what I am.

I suspect the "merchandise" is meant to tell you this is the rate for purchase of products or services, ie where you have paid a merchant.  The standard NW is 24.9% so fairly normal. 

If you were to take a cash advance or a "cash like transaction" (eg buying foreign currency) then you would be charged an additional fee and get no interest free period. Some banks also charge a higher interest rate but that doesnt appear to be the case for NW

If you cannot afford more then you need to look at the possibilities of a Balance Transfer card or Loan to lower the APR however if your at your limits its fairly unlikely you will be accepted or at least accepted with a decent APR or limit. 

I have a very good credit rating so could get accepted on a loan or new Transfer card.
I just don't know which would be the better option.
I owe £3200, and can't afford more than £100 a month. After 24 months, I would have £800 to pay if I transferred.
However with a loan I'd have nothing to pay off the card but the payments would be higher.

born_again

If you take out a loan, then cut up & cancel the card or you will just end up worse of. When you carry on using it.

Cheapest bet would be a balance transfer. Aim to pay it off in the interest free period & again cancel old card to remove temptation to keep using it. 
Digging a even bigger hole to get out of.

Might be worth posting in this section

https://forums.moneysavingexpert.com/categories/debt-free-wannabe

With a statement of affairs.

grumpy_codger

MSE: https://www.moneysavingexpert.com/credit-cards/balance-transfer-credit-cards

A loan will be more expensive.

CliveOfIndia

greggo1410 said:

Would it be better to get a loan to pay it off in full? 

Unlikely.  Firstly, you'd have to be extremely disciplined and not spend anything on the card once you'd cleared it.  But the bigger problem is usually affordability.  Since the lender cannot force you to use the loan to pay off the card, they have to assume that the loan would be in addition to - not instead of - your credit card debt.  This will be factored into their affordability calculations, meaning it's likely they wouldn't offer you a loan at all, or if they did it would be at quite a high APR.

greggo1410 said:

I have a very good credit rating so could get accepted on a loan or new Transfer card.

You have no idea how a lender would assess you.  If by "good credit rating" you mean the score/assessment given by the CRAs, ignore it.  It's just a meaningless marketing gimmick.  In fact, if you're struggling to repay your existing debt, it's likely that most lenders would view you as having quite a poor credit rating.

greggo1410 said:

can't afford more than £100 a month....
However with a loan I'd have nothing to pay off the card but the payments would be higher.

So if you can't afford to pay more than £100 pm to the card, how would you afford the higher loan repayments?  That simply adds weight to the argument against getting a loan.

See if you can get accepted for a BT card - even if you can't transfer the whole amount, transfer what you can.  It could also be worth filling out an SOA and posting it on the Debt-Free Wannabe board, you may find you can make some savings in your budget to allow you to pay more towards the debt.