Which? criticises credit cards over payment processes
www.moneynews.co.uk > Credit cards > Which? criticises credit cards over payment processes
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Which? criticises credit cards over payment processes
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The worst card for this was from MBNA, according to Which?, whilst usual minimum payments are at £5 or a percentage of the balance, say two or three per cent, MBNA uses a different approach.
Minimum payment by MBNA is calculated as 2.25 per cent of the balance, or the total of charges such as interest, handling fee or insurance plus £5. If the balance is less than £5 then whatever fee is lower is used.
This approach means that customers with the cards will find that most of their monthly payment will just cover charges, with only £5 going towards clearing off the debt.
Editor of Which?, Malcolm Coles, explained: "Paying just the minimum each month is never a good idea, but the MBNA method of calculation simply means it takes even longer to reduce your debt so the credit card company gets paid interest for longer.
"MBNA issues its own credit card and cards for Abbey, Alliance & Leicester and Virgin, as well as affinity cards."
Mr Coles advised customers borrowing on one of these cards and paying the minimum payment to check the calculation used and consider switching to a card which could clear their debts more quickly.
He added: "You can also save even more on your interest bill by choosing a card that offers an interest rate of 0 per cent for transferred balances for six or eight months, but if it's going to take you much longer than that to pay off your debt go for a card that charges you a low rate on your transferred balance until you've paid it off."
Related News : Credit cards |
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