Noticed the other day on the wife's credit card statement that she only paid the minimum amount every month. Also noticed that the interest charged per month was more than the minimum payment amount. It was only a small balance so I've paid the whole thing off, but I'm wondering how it can be legal to do that? I would imagine most people doing a minimum payment thing expect that whilst they're not going to be clearing their balance any time this century, they'll at least be chipping away at it. Instead, 12 months down the line they're over their limit and getting rogered by the CC company as a result.
I think the reccomendation from the FSA is that the minimum should be 5%. If her interest is more than 5% per month, you've got an interest rate that's more than 5% per month (which would be a 71% APR) then you've other issues
It was nowhere near that. 21.9% annual rate I think. Whatever the bog standard BoS rate is. I just thought it a bit underhand, that's all. e.g. minimum payment of 1.75%, but monthly interest of 1.8%
Underhand? You mean they've not provided any of this information on printed or online material?
Underhand?
The credit card companies wouldn't be in business for very long if the interest charged was less than the minimum payment (excluding introductory 0% offers)
Not a clue. Not my credit card.
I just thought it might not be in the spirit of the FSA Lending Code or whatever it's called at the moment. As "responsible lenders" they send letters out every couple of months reminding you that if you only pay the minimum amount every month then it will take you longer to clear the balance. This suggests that by paying the minimum amount you will [i]eventually[/i] clear the balance, which is patently not the case.
The credit card companies wouldn't be in business for very long if the interest charged was less than the minimum payment (excluding introductory 0% offers)
wut?
Are you absolutely sure of your numbers? Wasn't influenced by another payment midmonth or something like that? As 5lab says the APR would have to be astronomical or the minimum repayment tiny to make this work.
Absolutely sure of numbers. I double checked cos I thought I was going mad. No purchases or any additions to the balance on the card, something like £8 monthly payment but £8.22 interest.
And AFAIK, minimum payments are always along the lines of "1.75% of remaining balance or £5, whichever is the greater"
APR must be pretty high then, 1.75% is equivalent to over 23% APR. Unless you have CCRC?
No idea. As I say it wasn't my card, and it's cleared now anyway.
The APR doesn't make a difference to the point though: the CC company tells you that only paying the minimum amount means it'll take longer to pay off the card, a statement that, to me, clearly implies that paying the minimum amount will eventually clear the balance. In reality, paying the minimum amount would appear to add a slight amount to the balance every month meaning it'll never get paid off and at some point the credit limit will be reached/exceeded.
All I'm asking is whether or not CC companies are bound to make sure the minimum payment they take for any period, at the very least, covers any interest charged over the same period. And if not, why not?