The dangers of making minimum repayments
July 6, 2007
As a nation we are pretty reliant on credit cards because they provide us with increased convenience and flexibility.
However, in order to make the most of a credit card it needs to be used – and repaid – sensibly, and many people fail to do this. In many cases consumers are making only the minimum repayment on their credit cards, and this is leaving them in debt for years because their repayments are making very little impact on their actual debt, going instead towards paying interest that is added to the balance by the credit card companies.
Consumers are being urged to always pay more than the minimum repayments wherever possible in order to avoid extortionate interest charges and to get out of debt more quickly.
Ideally, consumers should be paying off their balance each month in full, as this enables them to make the most of benefits and rewards that come with the card, yet means that they will not have to pay any interest and will not get hit with late payment or missed payment fees. Even those that cannot repay the balance in full each month should try to pay off as much as possible.
It could take over two decades to repay a £2000 credit card balance with just minimum repayments according to experts, so increased monthly repayments could help to clear the debt far more quickly.
Groups such as the Consumer Credit Counselling Service have expressed concerns about those that stick to making minimum repayments, and one official from the group stated: “The main thing about people who have either store cards or credit cards is not just to pay the minimum amount back every month. That’s the main thing that leads people into debt.”
Alan Wright
6th July 2007
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