MILLIONS of consumers face being in debt for up to 30 years if they make only the minimum repayments on their credit cards each month, according to research.
One in ten credit cardholders, the equivalent of about 3.5 million people, pays only the minimum repayment each month, according to price comparison website uSwitch.com.
The website said that, on average, credit card companies set minimum monthly repayments at 2.6 per cent of the outstanding balance, with 35 card providers setting them at just 2 per cent.
It said if someone with an average credit card debt of £1,812 repaid their balance at a rate of just 2 per cent a month it would take them 29 years and two months to clear it and cost them £2,858 in interest.
But if people increased their repayments to 3 per cent, it would halve the time taken to repay their debt to just over 15 years and only cost them £1,257 in interest.
The group is calling on credit card firms to raise their monthly minimum repayments to at least 3 per cent and for them to print clear scenarios on monthly statements showing how long it will take to clear a balance and how much it will cost in interest if people make only the minimum repayment each month.
It also wants some lenders to abolish rules which state that people who pay their credit card bills by direct debit can only pay off the minimum repayment or the full balance, instead letting consumers choose how much they repay.
Mike Naylor, personal finance expert at uSwitch.com, said: "In an environment of rising
interest rates where personal debt in the UK has reached a staggering £1,325 billion, of which credit card debt accounts for £54 billion, consumers could now finish repaying their mortgage before their credit card, despite the huge disparity in sums borrowed. 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.
"There is little justification for setting minimum repayments at just 2 per cent and we believe that it is time that the industry agreed a standard minimum repayment amount of at least 3 per cent on all credit cards."
