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If you only repay the minimum amount each month on
a card which requires you to pay a minimum of 2%, it would take 26 years
to settle a card debt of £2,200 and at the end of this period you
would have paid out £2,463 in interest.
One in eight of us only ever pays off the minimum - and the card companies are making it as tempting as they can for more of us to
do the same.
Barclaycard has dropped its minimum monthly payment from five per cent to 2.5 per cent; Halifax, Bank of Scotland and the Co-op
have reduced their minimum repayment to 2% per cent.
You should use credit card wisely in order to avoid spiraling debts.
The best way is to clear the debt before you start spending again. Put
yourself on a budget where you can afford to pay more than the
minimum. It is also worth shopping around and transferring the
outstanding debt to a firm offering 0% or low
rates for balance transfers.
Card companies have been reducing the minimum payments required so they can make more money.
It makes sense for them as the longer it takes someone to pay off their debt the more interest
the cardholder will pay.
But it's a bad idea for a customer to pay back their debt over the longest period
possible. Even increasing your repayments by a small amount can dramatically reduce the interest you pay and the time it takes to clear your debt.
MPs are now pressing for card firms to include warnings on statements urging customers to pay back more.
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