A few months ago Halifax lowered their minimum repayment rate from 2% to 1%. Sounds great but, in the long term, you're actually paying more back to them.
But... that's not the gist of this thread.
I checked my online statement today & alarm bells started ringing very loudly in my very small ears.
I noticed that my minimum repayment by direct debit in January was LESS than my estimested interest. This would mean I would NEVER PAY THE DEBT OFF!!
I have phoned them about this & they are looking into it for me but, as they only look at these things on a personal basis, they won't sort out other HBOS/IF credit card holders unless they complain about their own accounts.
I'd advise anyone wth one of these credit cards to look at their accounts to ensure they're still paying enough to cover the interest due on the account. If you don't, you'll be up that creek without a paddle for the rest of your life!!!
I noticed that today too. Let me know what they say if you ring them.
Let me know what they say... They'll say the interest figure from the "interest + 5" calculation method is based on interest already accrued, not to be accrued in the period from this statement to the next.
The balance should be reducing by at least 5 per month shouldn't it?
I read this story a while back about the Halifax 1% minimum repayment (http://www.credit-card-comparison-online.co.uk/news/halifax-minimum-repayment-cut.html)...
It's quite interesting, because I think they had to include an additional clause of "minimum payment of 1% OR interest + fees + 5 whichever is greater" - because of the exact fact that 1% was not always enough to cover the interest charge.
Why should I beware?
They are making me more money by reducing the minimum payment.
Just because you pay interest on credit cards, doesn't mean it applies to everyone.
If you want to pay less interest, just make an additional manual payment.
Cheers, Des.
For everyone to note (and a special note for DesG below):
I've spoken to Halifax (who underwrite the Intelligent Finance card) and even they are surprised that there's more paid in interest than in minimum payments. They're looking into it for me and said I'd get a reply back in about 14-21 days (AFTER Xmas/New Year!!!). I'll update this forum when that reply arrives.
And....
I don't understand, Des G, how they can be making you more money if your minimum payments have dropped by half? Work it out?....
If you have a 2000 debt then your first minimum payment (1% of balance) will be 20, leaving 1980. The interest on the new balance (at their best rate of 12.9%) is about 21.30, giving a new balance of 2001.30. The second month would be a minimum payment of about 20.02, with interest (again) of about 21.30, giving a new balance of about 2002.58. Therefore, you're paying LESS in minimum payments than interest and, as your balance is increasing EVERY month, you'll NEVER pay it off!! So.... how can they be saving you money when your overall balance is going up??
It's OK to say to make manual payments to make up the difference but doesn't everyone think that the minimum payment should AT LEAST cover the interest due on the account?
Relevant replies welcomed.
I suspect DesG is stoozing using a 0% promotion in which case the lower the Minimum Payment the more profit you make because you keep more funds in an interest bearing account for longer.
As a stoozer, the lower the Minimum Payment the better.
I understand that this is not really helpful if you are incurring interest on the debt.
Another thread complaining about low minimum repayments.
I've said it before and I'll say it again - the banks can't win. They lower the minimum repayment - suddenly they're trying to make money out of us. They raise the minimum repayment - suddenly people can't afford it.
Nothing, I repeat NOTHING is stopping you paying more than the minimum payment.
So.... how can they be saving you money when your overall balance is going up??
Well on one level they are - the amount you pay out each month is less. Much the same as the remortgage companies that would reduce your monthly payment - by spreading it over a longer period.
Never mind the extra - even infinite - number of months you are going to be paying over.
Some people even fall for it.
Personally, Im very grateful for the reduction as there is now about 70 a month less going out. Yes, I know it will cost me more in the long run but that is of secondary importance to me at the moment because I can always BACS a bit extra if I have it. At least a reasonable wedge of my debt is still being repaid because I'm on a LOB deal (7.9% I think). I think the issue is that with a lower minimum repayment, at least you can set things up to pay some extra by BACS (or your preferred payment method) if you are in a position to do that. I'm surprised that the minimum payment didn't cover the interest as I thought that their rules didn't allow that.
My current situation is that I'm paying minimum payment + 5 to each credit card debt (LOB deals). Hopefully this will avoid me being targetted as a minimum payment only customer now that the companies are sharing more information. I also have a 4.9% deal that expires in May (reverting to 14.9%) so if I have anything spare, I am targetting that card as I want to have as little balance as possible left when the promotion ends.
Another thread complaining about low minimum repayments.
I've said it before and I'll say it again - the banks can't win. They lower the minimum repayment - suddenly they're trying to make money out of us. They raise the minimum repayment - suddenly people can't afford it.
Nothing, I repeat NOTHING is stopping you paying more than the minimum payment.
It's not overly relevant to me bacuse I always overpay by a considerable sum, but to those who are on Direct debits which they expect to cover the minimum and interest, it could be a sneaky way of upping the time it takes them to pay and ultimately cost the customer more.
Of course you can make more than the minimum payment by manually doing it, but that's not the point. They said the minimum should cover the interest PLUS 5 so that's what it should do - then everyone knows where they stand.
For everyone to note (and a special note for DesG below):
And....
I don't understand, Des G, how they can be making you more money if your minimum payments have dropped by half? Work it out?....
If you have a 2000 debt then your first minimum payment (1% of balance) will be 20, leaving 1980. The interest on the new balance (at their best rate of 12.9%) ....
Relevant replies welcomed.
You are looking at the fact that your interest rate is 12.9%, like DesG(I am assuming his case is same) I and several others are on 0% 11 months(or maybe 10 months) purchase which is safely stoozed away , in my case, 6% fixed rate ISA. The less halifax takes the better as it earns interest.
At the end of the promotional period I would pay from my savings over that period. I save a 11th of my balance every month in an esaving account so that by the end of the 11 months promotional period I would have saved enough to pay the balance off.
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