Cardholders urged to up minimum payment
Making the minimum repayment only on your credit card every month could equate to paying more than twice for your purchases, recent figures have shown.
Moneyfacts, a price comparison site, has revealed that if a cardholder spends £3,000 on a credit card charging 15.9% APR and repaying the minimum of 2.5% (minimum of £3), they would end up paying an additional £2,729 in interest. It would also take 25 years and two months to repay the debt.
Michelle Slade, analyst at Moneyfacts, said: “The Halifax All in One MasterCard offers 0% on purchases for 10 months. Many shoppers would be tempted by such a deal. However, if they just repay the minimum, they will end up being worse off than if they had used a card without such a deal.”
Making the minimum repayment (2%, minimum of £5) on a £3,000 debt on this card (15.9% after 10 month introductory period), would actually mean repaying £3,522.28, according to Moneyfacts, and would take 31 years and four months.
However, repaying a small percentage on top of the minimum payment could save borrowers thousands. For example, the research showed that the interest charged on the Halifax deal would be £279.41 if the cardholder was to repay £100 per month. The debt would be repaid in two years and nine months.
“Paying just the minimum is very tempting, especially at times like these when many families are struggling, but by doing so you will be storing up additional debt for the future,” Slade added.