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  • esmerellda
    • #2
    • 18th Jan 10, 3:58 PM
    • #2
    • 18th Jan 10, 3:58 PM
    Excellent well done MSE.

    I hope lots of site users have also contributed individually - its not often you get to input directly into something that affects us all so much - so if you havent yet go to the BIS site and have YOUR say too !
    LegalBeagles
    • DarkConvict
    • By DarkConvict 19th Jan 10, 1:32 PM
    • 6,249 Posts
    • 3,056 Thanks
    DarkConvict
    • #3
    • 19th Jan 10, 1:32 PM
    • #3
    • 19th Jan 10, 1:32 PM
    I would be for minimum payment hikes, but only on new agreements! I agree totally to do it on existing cards will end up with people having defaults as they budgeted for the current minimum payments based on there current commitments.

    I love the idea of stating the time it takes to pay off, and interest earned. A nudge is all some people need.

    I am a very anti-credit person except for mortgages, but everyone manages there finances differently.
    Although no trees were harmed during the creation of this post, a large number of electrons were greatly inconvenienced.

    There are two ways of constructing a software design: One way is to make it so simple that there are obviously no deficiencies, and the other way is to make it so complicated that there are no obvious deficiencies
  • Premier
    • #4
    • 19th Jan 10, 4:52 PM
    • #4
    • 19th Jan 10, 4:52 PM
    It appears there are still some cards where minimum payments do not even cover the interest charged.

    Here's an example.
    http://forums.moneysavingexpert.com/showthread.html?t=2214663

    I'm not sure supporting such practise that allows borrowers to get into ever spiralling debts is for their best.
    "Now to trolling as a concept. .... Personally, I've always found it a little sad that people choose to spend such a large proportion of their lives in this way but they do, and we have to deal with it." - MSE Forum Manager 6th July 2010
    • td_007
    • By td_007 19th Jan 10, 7:07 PM
    • 1,152 Posts
    • 417 Thanks
    td_007
    • #5
    • 19th Jan 10, 7:07 PM
    • #5
    • 19th Jan 10, 7:07 PM
    A blanket ban on increasing min repayment is not the right step forward - a low minimum repayment give a false sense of level of debt a person is in. However, consideration should be given to existing borrowers.

    A similar strategy to the option of freezing the interest rate and closing the card on clearing the balance if the consumer is unwilling to accept an increased interest rate can be used.

    Minimum repayment percentage for existing borrowers should be raised to minimum of 10-20% of the balance and customers unwilling to accept the new min repayment rate, should be given the option to freeze the min repayment rate they are presently on and then close the account once the balance has been paid off. For all new agreements, higher min payments should be compulsory. Amex already has 10% min repayment rate - this should be an example for others.
    • edgex
    • By edgex 19th Jan 10, 7:10 PM
    • 3,316 Posts
    • 4,545 Thanks
    edgex
    • #6
    • 19th Jan 10, 7:10 PM
    • #6
    • 19th Jan 10, 7:10 PM
    It appears there are still some cards where minimum payments do not even cover the interest charged.

    Here's an example.
    http://forums.moneysavingexpert.com/showthread.html?t=2214663

    I'm not sure supporting such practise that allows borrowers to get into ever spiralling debts is for their best.
    Originally posted by Premier

    precisely


    from the article:
    "new 'recommended repayment level' to clear debt within 3 years"

    credit cards should be short-term debt, not medium to long-term
    ideally the debt should be cleared within 12-24 months

    if that means minimum repayments have to go up, they go up.
    i really cannot see what the problem is with that


    "Allocation of repayments must be proportionate"

    what if the interest charges on the different types of debt on the card had to all be the same?
    & all the charging had to start at the same point in time?
    then it wouldnt matter what was getting paid down first, as it would all be costing the same.
  • CannyJock
    • #7
    • 19th Jan 10, 7:25 PM
    • #7
    • 19th Jan 10, 7:25 PM
    "new 'recommended repayment level' to clear debt within 3 years"

    credit cards should be short-term debt, not medium to long-term
    ideally the debt should be cleared within 12-24 months

    if that means minimum repayments have to go up, they go up.
    i really cannot see what the problem is with that
    Originally posted by edgex
    For those with low APR LOB deals or on 0% promotions, increased mandatory minimum repayments makes affordability a problem. Some of the best and worst cards are from the MBNA stable.

    Good points: Long 0% promotions, low 1% minimum repayments, reasonably generous credit limits, ability to transfer credit limits between products
    Bad points: 1% min repayment doesn't include interest, APR hikes prior to end of 0% promotion, marketing aimed at promoting spending

    Low minimum payments should still be available to help with affordability. The article's option of recommended payments would be an extra option from my reading.
    Last edited by CannyJock; 19-01-2010 at 7:36 PM.
    "A child of five could understand this. Fetch me a child of five." - Groucho Marx
    • MSE Martin
    • By MSE Martin 20th Jan 10, 8:55 AM
    • 8,115 Posts
    • 42,285 Thanks
    MSE Martin
    • #8
    • 20th Jan 10, 8:55 AM
    • #8
    • 20th Jan 10, 8:55 AM
    Low minimum payments should still be available to help with affordability. The article's option of recommended payments would be an extra option from my reading.
    Originally posted by CannyJock
    Thats correct in our submission we recommend and enforced menu of repayment options each explained in real terms so people can see the impact they'd be

    The Min Repay
    The Recommended Repay
    Fixed Value Repay (e.g. 200 - or the min whichevers higher)
    Repay in full
    Martin Lewis, Money Saving Expert.
    Please note, answers don't constitute financial advice, it is based on generalised journalistic research. Always ensure any decision is made with regards to your own individual circumstance.

    Don't miss out on urgent MoneySaving, get my weekly e-mail at www.moneysavingexpert.com/tips.

    Debt-Free Wannabee Official Nerd Club: (Honorary) Members number 000
  • georgeshepherd
    • #9
    • 20th Jan 10, 10:48 AM
    • #9
    • 20th Jan 10, 10:48 AM
    The promise of new rules is already bringing the greedy banks out
    with increases ahead of them. Halifax letter today 5% increase no offer of options to close and repay at old rate etc.
  • izools
    The promise of new rules is already bringing the greedy banks out
    with increases ahead of them. Halifax letter today 5% increase no offer of options to close and repay at old rate etc.
    Originally posted by georgeshepherd
    Doesn't matter if they don't openly offer it, if you call them within 30 days of the letter requesting it they have to comply by law.
    Cashback Earned Nectar Points 68 Natoinwide Select 62 Aqua Reward 100 Amex Platinum 48
    • edgex
    • By edgex 22nd Jan 10, 4:23 PM
    • 3,316 Posts
    • 4,545 Thanks
    edgex
    Thats correct in our submission we recommend and enforced menu of repayment options each explained in real terms so people can see the impact they'd be

    The Min Repay
    The Recommended Repay
    Fixed Value Repay (e.g. 200 - or the min whichevers higher)
    Repay in full
    Originally posted by MSE Martin

    its all very well 'showing' people what impacts different payments would have, but what if the low minimum payment isnt a good thing to be doing in the first place?
  • CannyJock
    its all very well 'showing' people what impacts different payments would have, but what if the low minimum payment isnt a good thing to be doing in the first place?
    Originally posted by edgex
    Then you go for one of the other options? As mentioned above, for people with multiple debts they should only make minimum payments on the lowest APR and 0% APR debts, allowing them to pay as much as they can to their higher APR debts. There's nothing inherently evil about minimum payments if you know how to use them to your advantage.
    Last edited by CannyJock; 22-01-2010 at 6:03 PM.
    "A child of five could understand this. Fetch me a child of five." - Groucho Marx
  • barber1
    I am fortunate enough to always pay off my credit card each month so any increase in minimum payments will have no effect on me.

    However, it does concern me that other less fortunate people are drawn into a debt cycle through either ignorance or circumstances. In my opinion the advantages of increasing the minimum payment are:-

    a) to ensure that people are actually paying back their debt, and

    b) it keeps people more in touch with the repercussions of putting stuff on their card.

    I'm going to be devil's advocate here and say that I think there should be a statutory repayment rate on all credit cards of 10%. I do agree with an earlier poster that this should only apply to new cards.

    The advantages for consumers:-

    a) less likelihood of insidiously getting deeper and deeper into debt,

    b) if people are struggling financially alarm bells are going to sound a lot sooner than they would with minimum repayments of a few percent,

    c) if you know you've got to pay 10% of your balance each month I think a lot of people will think twice before bunging stuff on the card without thinking.

    Draconion maybe but in my opinion there are too many people at risk of drifting into debt - and its not just the cardholder who suffers when things start to go wrong - think of the families and friends who have to deal with it.

    Low minimum payments play right into the hands of the credit card companies.
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