Minimum Interest - Is it legal?

Canny_mal

How can credit card companies get away with charging a minimum amount of interest? Next month my Barclaycard will charge me a minimum of £1 interest per month regardless of how little I actually owe on the card (at the moment it's 50 per month).

Surely this practice renders their quoted APR figures as nonsense.

Some might argue it's to cover their administration costs associated with managing a small balance which ordinarily wouldn't make them much money in interest.

Now correct me if I'm wrong but I don't know of a cashback creditcards who pay a minimum amount of cashback each month. What I mean is, say for example you earn 64p of cashback they kindly round it up to a pound.

I know we’re only talking about a £1 a month but for me it’s the principle of the thing.

This appears to me to be yet another example of the card companies bending the rules to further line their pockets.

jonesMUFCforever

I have had the same argument with Halifax credit card about this and they did not give me a satisfactorily answer; the only thing I have done is to stop using the card.
I would be interested in hearing if anything can be done about this if anyone has any information about who to complain to?
Eric

daveboy

I saw this on a Sainsbury's Bank statement - I think from memory their minimum is 50p.

For most of us, we'll be on 0% offers so it shouldn't come in to play - it did make me think about the legal aspect though. I thought when I noticed it that they were finding another way of making money because the fees they charge for over limit, late payment etc are being restricted by the authorities.

What I am worrying about, mentioned elsewhere on this board, is the re-introduction of an annual fee by MBNA (it appears for only some, but we'll have to wait and see).

I can see that becoming widespread again in the next couple of years. Once one does it, the others watch and follow them.

Rafter

It does impact the apr calculation but only a tiny bit.

The apr is worked out on a purchase of £1000 paid back in 12 equal installments over one year.

So in month 11 where the interest charge is likely to be less than £1, £1 would have to be included to calculate the total interest cost and therefore the APR.

Does seem to be a bit unecessary and sneaky though. OK if you round it up or down to the nearest pound, but with this system you could have 1p on your bill and pay £1 in interest in one month, which works out at........ wait for it........ an APR of 112,682,503,013,197,000,000,000,000% which makes even Vanquish look like good value!

R