Paying off a credit card making minimum repayments would take 26 YEARS on average
Making minimum credit card repayments alone could leaver customers in a 20-year debt trap.
28th January 2020 16:38
by Brean Horne from interactive investor
Making minimum credit card repayments alone could leaver customers in a 20-year debt trap.
Customers just making minimum repayments on credit card balances face a two-decade wait to clear their debt, according to new research from TotallyMoney and MoneyComms.
A customer holding the average UK credit card debt of £2,604, with a fixed interest rate of 19.9%, would take just over 26 years to clear their credit card balance, the figures show.
Experts advise that customers pay off more than the minimum repayment each month to avoid falling into the trap.
Alastair Douglas, chief executive at TotallyMoney, says:“It’s understandable that in certain months customers can only afford the minimum repayments.
Sometimes it may be tempting to make a smaller repayment to keep as much cash in the bank as possible.
“However, the figures show this is an incredibly expensive option.
“And that’s just the tip of the iceberg. Many will pay even more interest on their credit card balance if they have a higher annual percentage rate."
How to clear your credit card debt
Credit card borrowing can be expensive so it’s important to clear your debt sooner rather than later. These three tips can help you pay down your credit card balance quickly.
1. Check how much you owe
Work out exactly how much you owe on your credit cards and make a repayment plan to help you clear your debt faster.
If you're having trouble with your repayments charities, such as StepChange, offer free advice to help you get back on track.
2. Get a balance transfer card
A balance transfer card can help you cut the cost of your debt. They allow you to transfer your credit card balances onto one card and pay it off over a certain amount of time with no interest.
3. Use an interest-free purchase card
An interest-free purchase card lets you make a purchase and spread the cost over a set number of months without incurring interest.
They can be handy for large or unexpected purchases and allow you to keep your repayment costs down.
This article was originally published in our sister magazine Moneywise, which ceased publication in August 2020.
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