Credit cards

mejinks

mejinks

mejinks

Soldato
Joined
28 Oct 2002
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Hiraeth
If you don't spend on your credit card and you have a direct debit set up to pay the minimum payment each month, how is it possible to go over your limit?
 
It depends on how they calculate the interest....in some cases the minimum payment doesn't cover the charges to the CC....MBNA/Capital One etc were infamous for this kind of thing.
 
Another thing that was noticed is that the interest rate has been bumped twice in 2 months. Now standing at 22.05%.
 
If the direct debit makes the minimum payment, and the minimum payment is something like a tenner, and you spend £500 a month on the card...

Do you mean setting the direct debit to pay it off in full each month?
 
If there is a balance on the card, you only pay the minimum payment and you don't spend anything else on the card it's still possible to go over your limit. Depending on the balance and interest rate you could well be paying more interest than the amount you clear each month.

Minimum payments are bad, mmmmkay?
 
Rotty said:
interest exceeding min payment ? doubt that would be something that would be normal though
Click to expand...

With my sisters card with MBNA it happened every few months or so, as the minimum payment was calculated as a percentage of the balance and instead of adding interest to that and then the total being the minimum payment, the minimum payment was simply 2% of the card balance. Given interest was calculated daily, it creates a system where the minimum payment doesn't cover the interest accrued and thus your balance increases. Because her balance was never decreasing we paid it off for her and she repays us the minimum payment instead (obviously without the interest)

I think they have been forced to change that practice now though.
 
Hmm. I thought the rules had been changed so that you had to pay the greater of interest + x% or y%. Perhaps the change wasn't retroactive.

Even still, at 2.5% (lowest I remember seeing) per month minimum payment the nominal interest rate required for you to exceed your limit would be 2.5%, which works out at an very high APR. The 22% you're quoting won't do that...

Is it possible your credit limit was reduced?
 
mejinks said:
Another thing that was noticed is that the interest rate has been bumped twice in 2 months. Now standing at 22.05%.
Click to expand...

maybe the minimum payment didn't cover all the interest thus your balance kept on increasing

top tip - transfer your balance ASAP there are plenty of 0% deals out there and paying a balance transfer fee will be better than paying 22.05% interest on a debt you're not able to pay off at the moment.
 
[TW]Fox;21791683 said:
What if the minimum payment was 1%..
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Then, yeah, it'd go over...but I don't think that was legal. I think though the minimum allowed was 2.5% and then it changed to 1% over the interest charged.....

I'm going from memory here, I can't be sure.
 
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