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Credit cards

13 replies

MoiraRose · 01/01/2020 19:18

Just told DP I want to pay the credit cards off this year and be debt free, he said its a good idea because apparently, he said he said in The Mirror the other week that from March if you pay the minimum amount on your cards they will send the bailiffs out. I said that sounds very unlikely as it's the company that sets the minimum payments and is actually an option for everyone, not just people struggling or whatever, but he's adamant it's true.

I had a google and can't find anything. Has anybody else heard of this? He said it was a full double page middle spread all about it

OP posts:
dementedpixie · 01/01/2020 19:21

Think he's talking rubbish. You would only have an issue if you weren't making any payments at all and were in arrears

dementedpixie · 01/01/2020 19:24

This might be what he is talking about:

www.which.co.uk/news/2019/06/credit-card-borrowers-with-longstanding-debts-given-final-warning/

MoiraRose · 01/01/2020 19:33

dementedpixie just asked him and yes, that's what he meant! So really, nothing like what he told me Confused

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booellesmum · 01/01/2020 19:37

I was paying the minimum amount on my credit card and the company decided that wasnt good enough so cut my limit by around 50% so I was then at the max limit they would allow me.
I called to question and they said as I only paid the minimum amount it indicated I may be in financial difficulty and they didnt want me to borrow any more.
I had never missed a payment and am financially secure.
I found this very bizarre but be warned paying the minimum amount may result in your credit limit being cut.

VanGoghsDog · 01/01/2020 21:57

I had never missed a payment and am financially secure.

Why not just pay it off then?
I pay mine in full every month.

dementedpixie · 01/01/2020 21:59

If you are financially secure why would you only pay the minimum payment? It takes years to pay off that way and you pay a lot in interest

BeBraveAndBeKind · 01/01/2020 22:03

As Pixie has shared above, the Financial Conduct Authority has set new regulations for credit card providers which mean they cannot allow customers to continue to just pay the minimum payments for year after year. It's an effort to tackle persistent debt. As it says on the statements, if you only pay the minimum payment, it will cost you significantly more in interest. There's a good calculator illustrating it on the money saving expert website.

MillicentMartha · 01/01/2020 22:05

The point is that the minimum payment really isn’t enough and it means you’re paying huge amounts of interest. Which is generally in the credit card companies’ interest, they earn more. So the FCA are forcing the issue. 27 years to pay off £3000 via minimum payments!

NeverTwerkNaked · 01/01/2020 22:07

Only paying minimum payments has always been a bad idea. Even if you can only manage a bit more than the minimum it will make so much difference to the speed you pay it off.

ANiceLuxury · 01/01/2020 22:59

Wow. First I’ve heard of this, I always pay mine in full.

What happens to people only paying the min because they literally cannot afford anymore?

booellesmum · 01/01/2020 23:05

I was paying the minimum as had a direct debit set up for that and hadn't checked balance for a while due to lots of family stuff going on. It has now been paid off.
It was the principle that annoyed me. I wouldn't have minded had they contacted me to say pay more than the minimum or we will cut your available credit.

BarbaraofSeville · 02/01/2020 05:14

What happens to people only paying the min because they literally cannot afford anymore

It will focus their minds to do something about a very expensive way of borrowing money, that can take decades to pay off. It might be as simple as paying a constant amount instead of the minimum, which reduces as the balance reduces.

So for example instead of paying £100 this month and then £99 next month, £98 the month after, etc etc, they pay £100 every month.

Which brings the time taken to pay off the balance from many many years (depends on the Interest rate but sometimes almost all the payment goes in interest and only a few pounds goes towards reducing the debt) to maybe 2 or 3 years.

And if that's still a struggle, then it's probably time to seek a more formal debt solution. Over the past 20 years or so we've sleepwalked into a situation where people can take out multiple credit cards and get into tens of thousands of pounds worth of debt and they don't realise this until the minimum payments are hundreds of pounds a month that they cannot or can only just afford, with those payments doing little to reduce the balance so people struggle for years without getting anywhere.

When I took out my first credit card, the minimum monthly payment was 5% of the balance, over the years this has reduced to 1 or 2% on some cards, meaning that the point at which persistent debtors realise that they are in trouble, ie when they can't afford to pay the minimum, is a much larger amount of debt.

Say you can afford to pay £100 pm. If the minimum payment is 5%, the amount of debt you are in when the minimum becomes unaffordable is £2000. If it's 1%, it's £10k, which is obviously a much bigger amount to get on top of and actually pay off, especially if £90 of that £100 you pay goes on interest and does nothing to clear the balance.

BarbaraofSeville · 02/01/2020 05:17

OP, a good place to start is the moneysavingexpert money makeover as it will walk you through setting a budget, minimising essential costs, maximising income and identifying any cheap balance transfer deals you are eligible for, to help you get your card paid off asap. Good luck. Smile

www.moneysavingexpert.com/family/money-help/

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