Disaster For Halifax Cardholders!

Oh dear

Its going to be a recipe for disaster as peole will know think that they are saving when this is not the case

Dr squash

About 0% transfers. Surely the position on these has changed since some of them have started to charge a 3% transfer fee?

How is this wrong? Nobody is telling you to pay less of your balance just because the MMR is reduced. Why not just pay the same amount per month that you have always been paying? There's no rule that says you only have to pay the MMR. And if your income has been reduced, then spend less.

In my experience, card providers put a warning on their statements now which say something to the effect of "if you only make the minimum payment, it may cost you more and take you longer to pay off your balance".

If people can't understand that, they deserve to be propping up our credit system. ;o)

As already noted, very good news for Stoozers, even with the balance transfer fees.

I have just registered so that I can now add my voice to the others complaining about scaremongering articles!

With the current credit crunch, soaring inflation, and, in real terms, negative pay rises, people are struggling to maintain the same budgets as previously. This move may mean they pay more overall, but will also help them to remain liquid until this fiasco has cleared; a small price to pay compared to bankruptcy and repossessions. Yes, the card companies will make money out of it; that's their job. However, if it prevents finding yourself in court then the consumer wins too.

At the end of the day, the same thing applies as before: Always pay as much as you can afford for these things; it's just now some of us may be able to afford less and now have the option of temporarily paying less until we're (all, hopefully) back on the level.

I must say that I am very disappointed by the tone and stance of recent Fool bulletins.

Basic economics should be taught at school.If it was then nobody of sound mind would run up a medium or long term loan on a credit card.But the banks have to take responsibility.When will they learn not to lend money to people who cant pay it back.

Minimum payments will result in a spiral of debt that can only lead to financial disaster. This looks like a desperate move from a desperate bank.

I think that the main problem with this is that people who are feeling the financial pinch will simply accept the default position of the lower mmp and not think much about it. They will carry on spending as they have done before instead of being forced to make some serious lifestyle changes.

Yes, it sounds like the HBOS is trying to increase profits by encouraging lenders to extend their repayment times.
However if this means these same people are taking on more debt in consequence, then is this not another bubble in the making?
Your home may be at risk if you do not keep up repayments. And with falling house prices there may not be enough equity left in the property to cover this. Britains sub prime?

The above states-

"the greater of:

1. 1% of the outstanding balance; or

2. an amount equal to the interest and insurance premiums charged, plus any penalty fees, plus £5.

However, almost all standard HBOS-issued credit cards charge an interest rate of more than 1% a month (12.68% APR). Thus, almost all customers will pay the second amount, which consists of all new charges to the account plus £5."

Then goes on to state:-

"In effect, the vast majority of cardholders will see their MMR slashed to such a low level that it will only repay £60 of their debt each year. Thus, a relatively modest debt of £2,400 will now take four decades to repay!"

The second element suggests the modest debt of £2400 would attract only a £5 MMR as per the second of the above stated alternatives. This cannot be the case as it clearly states "the greater of" in this case 1% of £2400 would be £24, and therefore the greater of the alternatives, which equates t0 £288 per annum (assuming the £2400 debt throughout).

As others have said this is the miniumum, individuals have the right to pay any amount between this level and full clearance. The card companies however often allow auto direct debit at the minimum level or the full level so individuals need easier ability to pay higher amounts, perhaps introducing an option that repays a % set by the individual.....that would help, however its down to whose interests the card providers are serving, my guess is they would much rather have only the minimum repayment amount available by auto direct debit. Time will tell......

Disaster! Nightmare!

What a ridiculous headline!

There are plenty of real disasters going on and enough anxiety in the world of finance without this kind of alarmist and irresponsible journalism.

Well done, I'm sure you got plenty of click throughs to the article. I'm sure minimum repayment amounts on credit cards are no 1 on the list of personal finance concerns for the British public at present.

What utter rubbish Fools writers are grinding out now. Are you joining Robert Peston in making up what you cant read in press releases now?

I dare say that HBOS is doing this to protect or enhance its profits (which is after all what it is there to do), but their thought process may be more complex than "if we do this more people will owe more money for longer so we'll make more money in interest".

On the one hand, as others have noted, reducing the MMR makes it easier (in the short term) for people to manage the debt they already have and may reduce the number of people who get tipped over into default. Default for the card holder means write-off for the card issuer, which is a hit on this year's P&L. They don't need that right now.
But in making it easier for people to keep bigger balances for longer they are giving up the option to do what NR has done, namely deleverage as quickly as they can - by reducing the amount they're owed as quickly as possible and damn the consequences for the borrowers.

HBOS is entitled to assume that it is dealing with sane adults and its responsbility is to maximise its profits subject to proper disclosure and not breaking the law. At this time, it seems to think it will do that by minimising its exposure to write-offs and it is changing its MMR policy accordingly.

In my opinion that is not only good judgement on grounds of self-interest but also helps to damp out some of the bad systemic consequences of the present credit shortage (ie helps others, if they want that kind of help).

Problem?

And by the way, it is not the job of the regulator to make sure that whatever people do, everything is all right in the end. Their job is, among other things, to let people learn by their mistakes. Making sure people have access to the right information is one thing and making sure they interpret and use it properly is quite another.

Hi

I've commented on many occasions about people posting in response to these articles simply to criticise the writng style of the journalist but I find myself doing the same thing.

As previous posters have pointed out, why the sensationalist headline? You could have got the point across without the hysterical doom-mongering; surely we've got enough of that in the regular press?

Could you please get back to sensible and informative, (and yes, often tongue in cheek) reporting of the financial issues? If I want screaming "the end of the world is nigh" type reporting I can read the Mail or the Sun but I expect better of the Motley Fool!

I hope someone is taking notice of these criticisms because they seem to be becoming more and more prevalent and I think you risk losing some of you most loyal followers if this continues.

Kind regards

With an MMR this low, the Direct Debit option will take for ever to repay the existing debt, let alone any new spending. At present most providers have 2 direct debit options - full or MMR.

With this low an MMR, there should be another intermediate option available to pay off balances in 1-2 years.

Oh dear you foolish old mutley you! Methinks you have put your foot in it--Lets have some good news now----how about some more food articles about making your own jam with your organic hedgerow blackberries and saving pounds---of jam I mean----or even knitting your winter socks from free cat hair . Oh yes keep warm with a fast run around the block , and another thing get 9 Andrex free on a bogoff for £6 at Somerfield. Anyhow Mutley I still love you! x

Aaww...isn't that a kind gesture from the bank. I won't have to pay out as much at the end of the month, feeww, I'll go and spend more on my credit card now. Governments bailing out the banks, banks not even trusting banks, we the public not trusting banks, what's going on?! Cut up those cards folks, we need to give the banks a LOUD message...Their behaviour is just not good enough. The best weapon we have is People Power!

Either pay back the MMR or the full amount? Why not take the direct debit for the minimum repayment, which at least avoids late payment charges, and then pay as much more each month as you can afford?

As most of today's problems seem to be fueled by debt. I think the only sensible option is to ban all credit cards. In the long run think of how much happier you will be by not giving the banks a large proportion of your spending thus reducing your ability to spend more.

Excuse me FoolSte it is not only a fool who makes the minimum monthly payment - people who have fallen into unforeseeable, unexpected, unplanned dire straits use this too.

For people with solid jobs, disposable income and pots of savings, I am very happy for you, you can pay off the existing monthly balance with huge advantages....

But what is it about people these days Cliff D'Arcy take note, when they fail to broaden their thought passages to understand the real terror that can be felt when you suddenly lose your job with credit card balances owing?? In such cases, which is happening relentlessly in the current climate - the 1% MMR can be viewed as a life line when luck seems to turn against you.

And consider - it does not mean that one will remain in this position for the extent of one's life, (no condition is permanent), but it does mean that while the going is tough, there is a life line - a way in which you can avoid the CCJ for the present, it can buy you the time you need to get your act together.

If you can pay more, please do - but think, not everyone can (even though they may wish to).

There are some people in Britain today who have not even recovered from the City's downsizing of the late 90's never mind the credit crunch. For whom its been one long struggle to find work particlarly if you had hit the big 4 O.

So lets have a rethink of this exaggerated headline - it certainly is not a disaster for anyone. Pay it off if you can as soon as you can, but if through whatever misfortune has been thrown at you, you simply cant, by all means use the low MMR until your finances improve to the extent that you can pay bigger chunks and in time clear it off.

FoolSte's correction of previous posts is in fact incorrect!

The Suicide Act 1961 decriminalised suicide and attempted suicide in England and Wales. Certainly, passively watching may not be illegal but assisting (conspiring) may be. The use of the term "committing" lingers from the pre-1961 days but is increasingly being consciously avoided.

Well said Ladyrosemary!

Although I didn't accept it, I am sure I have been offered a form by my credit card issuer that would let me authorise the direct debit collection of just the minimum payment each month.

If HBOS has offered this same facility, then the people who are now in danger are those whose payments will fall sharply, racking up more interest for HBOS and leaving the cardholders in debt for far longer.

People can quite rightly make a conscious choice to pay the minimum or more than the minimum - but anyone with an automatic direct debit that pays only the minimum may well not notice that they are slipping deeper into the debt mire - and that's wrong.

My Virgin credit card sent me a letter stating that in order to ensure that I didn't incurr any penalties they were reducing my DD of 3300 to the minimum!!!!
They also stated that I could ring up to discuss keeping my higher rate payment. I did so and discovered that I could discuss it BUT they weren't prepared to take more than £25 a month from me.
Well of course, I have set up a SO for £275. But they must have been calculating that amongst all those sent this letter, they must have a fair few who will miss topping up.