Is your minimum credit card repayment clearing your debt?
July 26, 2007
Most consumers are only too aware that by making only the minimum overdraft repayment on their credit card they are likely to be in debt for far longer, and will have to pay far more interest overall.
However, some may not realize just how long they may be in debt, and this is because of a new tactic that many credit card companies have started using in order to try and make more profit from cardholders in light of recent changes made by regulatory bodies in the UK.
According to a spokesman from one credit card company: ‘Each credit card statement carries a warning to customers that by choosing to make the minimum payment each month, it will take longer and cost more to pay off the card balance. Estimated interest depends entirely on the spending of the individual’s account during each statement month.’
However, officials state that many credit card customers are being duped, as credit card companies try and narrow the gap between the interest charged and the minimum repayment.
According to reports some credit card companies are actually setting the minimum repayment lower than the interest being charged each month, which means that in effect the customers is not only not clearing the credit card balance, but is actually adding to it.
One industry expert stated: ‘A lot of providers have been narrowing the gap between the minimum payment and the interest charged, so it is important to check your statement and pay as much as you can.’
It is thought that this is yet another way for credit card companies to try and recoup losses that came from ceiling limits being placed on penalty charges last year.
Alan Wright
26th July 2007
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