Credit card customers 'face lifetime of debt'
Published On 19 July 2007
Millions of credit card users are facing a lifetime of debt because they only pay off their monthly minimums, a new report suggests.Consumer website uSwitch.com has calculated that 3.5 million credit card customers face repayments lasting nearly 30 years because each month they pay back the least possible.
While the average minimum monthly repayment for the 60 major credit card providers is 2.65 per cent, some - like Bank of Scotland, Egg and Co-op - require users to pay back just two per cent of their debt every month.
However, uSwitch argues that if providers increased the minimum monthly repayment to three per cent, consumers would halve the time they remain in debt and reduce collective interest payments by £5.5 billion.
"Despite the introduction of 'health warnings' on credit card statements, the implications of making the minimum repayment each month are still not clear enough to consumers," commented Mike Naylor, personal finance expert at the site.
"There is little justification for setting minimum repayments at just two per cent and we believe that it is time that the industry agreed a standard minimum repayment amount of at least three per cent on all credit cards.
"We urge all credit cardholders who pay the minimum off their credit card bill each month to think about the amount of interest they'll end up paying as a result."
Recent Credit Action figures show that total credit card debt in the UK is now £54 billion.
