Minimum payments but dont cover interest

john36riv

I have a platinum MBNA credit card and have taken a close look in the last week where all my finances are at. I dont know if I am the only one who shoves the statement in a file in the knowledge that all my outgoings are covered by direct debit. I dont have the time to scrutinise everything.

I have noticed that my balance has increase by around £300 in the last 6 months even though my minimum payments have been taken by direct debit. I contacted them today to say that I had never heard of minimum payments not even covering the interest.

They have agreed to reduce my rate from 29 % to 16% for the next 12 months. This is fine but I feel my account has been mismanaged and would like to know if this is legal and if there is anything I can do to challenge the company over this scenario.

We are pretty much breadline at the moment so meeting minimum payment is all we can do right now so it is soul destroying to see the balance increase.

Your help would be so appreciated.

jonesMUFCforever

I think under the new banking code that the minimum payment has to cover interest and charges and any PPI charged.
Get yourself a copy and go back to MBNA - I assume that they are members of the BBA even if they are yanks.

john36riv

I thought it didnt seem right. thanks for giving me some direction.

john36riv

Great advice. the banking code March 2008 item 10.13 'We will make sure that your minimum repayment covers more than that months interest'

What do I do now? Should I approach the company again fully armed with this fresh info. I wrote them a letter last time. They responded with a letter asking me to phone them. Should I write or phone this time or should I go straight to the ombudsman.

How do I work out in monetry terms what I'm entitled to request of the company in terms of rectifying their breach of code?

Thanks again.

YorkshireBoy

I thought the MBNA minimum payment was calculated as "interest + ppi + fees + £5" (or 3% of the balance...whichever is the least)?

If that's the case, shouldn't the balance be reducing...albeit only by a fiver a month?

loopylou3

Hi, i also have an abbey card which is MBNA and balance £7500. I have noticed my balance reduces by only £5 per month. Do you think thay might reduce my interest rate as this is killing me. Am just able to make the payment but don't know how long for. I was thinking of applying for another card but already several maxed out and am worried i will be declined because of this. Also, if i was accepted, i would probably be given a limit nowhere near the £7500 i need to transfer.

jamalfatty

john36riv wrote: »

I dont know if I am the only one who shoves the statement in a file in the knowledge that all my outgoings are covered by direct debit. I dont have the time to scrutinise everything.

This is fine but I feel my account has been mismanaged and would like to know if this is legal and if there is anything I can do to challenge the company over this scenario.

Pot. Kettle. Black.

What is happening is called negative amortization and shouldnt have been left unchecked for so long by them if indeed it is the case this is ocurring

http://en.wikipedia.org/wiki/Negative_amortization

I'm going to hazard a guess though that you have PPI, which could be the reason this has ocurred. If you do, could you do without it for a few months perhaps to help you get situation under control?

They have agreed to reduce my rate from 29 % to 16% for the next 12 months. This is fine but I feel my account has been mismanaged and would like to know if this is legal and if there is anything I can do to challenge the company over this scenario.

We are pretty much breadline at the moment so meeting minimum payment is all we can do right now so it is soul destroying to see the balance increase.

I appreciate it is very frustrating, been here myself, but as to if it has been mismanaged, would you have preferred them to have ramped up your minimum payment considerably causing you to default almost immediately and screw up your credit file, have the DCA's chasing you etc?

If they have almost halved your APR now, you should throw as much money as is humanly possible at it and you'll soon find the minimum payments coming right down

john36riv

loopylou3 wrote: »

Hi, i also have an abbey card which is MBNA and balance £7500. I have noticed my balance reduces by only £5 per month. Do you think thay might reduce my interest rate as this is killing me. Am just able to make the payment but don't know how long for. I was thinking of applying for another card but already several maxed out and am worried i will be declined because of this. Also, if i was accepted, i would probably be given a limit nowhere near the £7500 i need to transfer.

I know what you mean. MBNA gave me an instant £10 000 credit which was far too tempting at the time. All I can suggest is that you call your customer services like I did. I pointed out that, although I was meeting the minimum payments, it was crippling me. They gave me a number for a different department who I phoned. They did a credit check on me (for some reason) and agreed to fix me at 15.9% for 12 months which virtually halves my interest for the next year. At least you were paying something off the balance though however small. Hope this is of some use.

john36riv

jamalfatty wrote: »

Pot. Kettle. Black.

Harsh but fair. However, I am a Surveyor. People trust that I am doing my job professionally and correctly. The money from this enables me to put everything on direct debit and forget about bills. If I have a bit left over then I can throw an extra payment in here and there. I trusted MBNA to at least take enough to cover the interest. It is their job to do this and they didnt do it correctly.


I'm going to hazard a guess though that you have PPI, which could be the reason this has ocurred. If you do, could you do without it for a few months perhaps to help you get situation under control?

I dont have PPI. It was just an error by the card provider which goes against the banking code 10.13

I appreciate it is very frustrating, been here myself, but as to if it has been mismanaged, would you have preferred them to have ramped up your minimum payment considerably causing you to default almost immediately and screw up your credit file, have the DCA's chasing you etc?

I wouldnt have defaulted. I budget well. I just dont necessarily scrutinise every bill as I should from time to time. I just see the bottom line and allow for that figure.

If they have almost halved your APR now, you should throw as much money as is humanly possible at it and you'll soon find the minimum payments coming right down

I will. Thanks.