People with Vanquis credit cards are getting texts and letters saying their minimum monthly payments will be increasing as the calculation is being changed.
This is happening from July 2018.
The new minimum payment calculations
At the moment Vanquis calculates the minimum monthly payments as the highest of three figures:
- 3.5%, 4.5% or 5% of the balance on the account (depending on APR) plus any amount the balance is over the Credit Limit; or
- any interest charged plus any default charges and account maintenance fees plus 1.5% of the remaining balance; or
I think most people will currently be paying the second figure, which can be summarised as “interest + 1.5% of the balance“.
In July this is changing to be the higher of two figures:
- the interest charged plus any default fees we have charged plus 2.5% or 3% of the balance on the account (depending on the APR); or
After this change most people will pay “interest + 2.5% or 3% of the balance” in future.
So people will be paying an extra 1% or 1.5% of their balance each month. For someone with a balance of £2,000 that is an extra £20 or £30 a month.
Why Vanquis are changing the minimum payments
Vanquis is increasing the minimum payments in response to the FCA’s new rules on Persistent Credit Card Debt. Higher minimum payments will mean that many fewer Vanquis customers are likely to be fall within the FCA’s definition of someone in persistent credit card debt, so Vanquis customer probably won’t be getting the warning letters about paying more than the minimum.
Vanquis is also going to be calculating a higher Recommended Payment which will show on each statement, encouraging customers to repay their balance faster.
I think that increasing minimum payments is a simple way to help prevent people getting trapped into permanent credit card debt. But I think increases are better phased in over a year, so people aren’t hit with a big increase without warning and time to adjust.
This Vanquis approach of a single large change may cause some of its customers difficulties.
Delays to refunds
At the same time Vanquis has also announced it is going to take longer to make its ROP refunds. Vanquis has told me:
We had set out with an aspiration to complete the majority of refunds within 90 days for existing customers and 180 days for past customers.
The scale and complexity of refunding our customers, in some cases back to 2003, has taken a little longer to start than we had at first anticipated.
Nevertheless, we can confirm that we expect to complete the bulk of the refunds (apart from the exceptional, most complicated cases which may require more time) towards the end of the summer.
UPDATE In June 2018, Vanquis started sending out the first emails to people getting refunds. But some of them look low. I queried the methodology with Vanquis, who finally provided a detailed example. So I can now see what the problems are… read The ROP refunds are wrong – it’s time to complain