New Day: Bye Bye Minimum Payment?

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  • stehouk
    stehouk Posts: 412
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    Will the extra payments really make a difference ?
    The extra money will have to come from somewhere, maybe they spend the same amount back on the card because they are short at the end of the month, if they really want to help people a better idea would be to lower the interest rate.
  • [Deleted User]
    [Deleted User] Posts: 35,242
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    The problem with lowering the rate on the high risk group is that you'll need to increase it across the lower risk cohorts, as it won't have a sufficient impact on the default rate.
  • chattychappy
    chattychappy Posts: 7,302 Forumite
    I can see the posts now:

    I signed up for DD as recommended on this forum and by Martin. I started to get these messages about paying more than the minimum. No problem, I thought. I've done everything right: I signed a DD. But after a few years I checked a statement and found I still owe £xxx. (I don't normally bother with statements, I'm too busy.) So imagine my horror when I called them up to find that the reason for this is that they didn't take the extra. The woman on the phone was very rude to me. She kept shouting and swearing at me and I felt humiliated. She tried to tell me that I must pay this money. Why should I pay £xxx to greedy bankers when it was their fault I'm in this mess? My question is: Obviously I'm not paying the balance back. But how much compensation am I entitled to? :j:j:j:j
  • I can see the posts now:

    I signed up for DD as recommended on this forum and by Martin. I started to get these messages about paying more than the minimum. No problem, I thought. I've done everything right: I signed a DD. But after a few years I checked a statement and found I still owe £xxx. (I don't normally bother with statements, I'm too busy.) So imagine my horror when I called them up to find that the reason for this is that they didn't take the extra. The woman on the phone was very rude to me. She kept shouting and swearing at me and I felt humiliated. She tried to tell me that I must pay this money. Why should I pay £xxx to greedy bankers when it was their fault I'm in this mess? My question is: Obviously I'm not paying the balance back. But how much compensation am I entitled to? :j:j:j:j
    I have highlighted the errors of your ways!
  • Having a minimum payment setup can be very easy.....direct debit takes care of that.

    However as I mentioned in another thread it would be useful to have a feature like direct debit for min amount plus a certain percentage or amount.

    Which I think newday are introducing here with a booster feature

    Would that not be a standing order...minimum plus say 10%...sorted.
  • stehouk wrote: »
    Will the extra payments really make a difference ?
    The extra money will have to come from somewhere, maybe they spend the same amount back on the card because they are short at the end of the month, if they really want to help people a better idea would be to lower the interest rate.

    Extra payments can make a massive difference over the life of a debt.

    If people don't pay down their card in a reasonable length of time the card companies will just close the account. That is also a good thing.
  • Anthorn
    Anthorn Posts: 4,362
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    stehouk wrote: »
    Will the extra payments really make a difference ?
    The extra money will have to come from somewhere, maybe they spend the same amount back on the card because they are short at the end of the month, if they really want to help people a better idea would be to lower the interest rate.

    New Day refers to "Paying down the balance" which means every month the balance is lower than the last month. In short paying off the balance quicker than if only the minimum payment was paid. What New Day don't say is how quickly they want a balance paid off and that is relevant to the amount they require to be paid every month and that is in turn relevant to how much customers can afford to pay. That is also pretty much a mockery of rolling credit which most of us will be used to in credit cards: If "paying down the balance" is important then it's more like a personal loan.
  • From what I remember about the FCA guidance, if after a couple of years the balance on your card remains overall the same then lenders need to take action.

    A credit card is not designed as a permanent line of credit that you don't ever pay off.

    I think it's important to remember these rules are about protecting consumers from themselves or from lenders who are happy to lend at high interest rates indefinitely.

    Most people pay their cards off or pay enough off that they don't spend £1000's in interest.
  • Owain_Moneysaver
    Owain_Moneysaver Posts: 11,357
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    customers who "can only afford the minimum payment" can't actually afford a credit card.

    The minimum payment should really be more than the APR % otherwise you'll never pay the thing off.
    A kind word lasts a minute, a skelped erse is sair for a day.
  • enthusiasticsaver
    enthusiasticsaver Posts: 15,445
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    Paying minimums only for significant periods of time is a bad thing and in general credit cards should dissuade people from this but of course this will hurt their profits.
    I’m a Forum Ambassador and I support the Forum Team on the Debt free Wannabe, Budgeting and Banking and Savings and Investment boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.
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