Welcome to this monthly Accounting News bulletin from DG Accountancy Services (http://www.businessbods.co.uk) bringing Small Business' news and information from the business world, as it happens!
Thursday, 2 August 2007
One in 10 credit cardholders only pay their credit card debt by the minimum repayment each month – which could leave millions in debt for up to 30 years – according to price comparison website uSwitch.com. The group found that about 3.5 million borrowers only repay the monthly minimum. On average, this is set by the credit card companies at 2.6% of the outstanding balance, but for 35 card providers it is just 2%. uSwitch then calculated that if someone with an average credit card debt of £1,812 repaid their balance at a rate of just 2% a month, it would take 29 years and two months to clear it, and cost them £2,858 in interest. However, increasing repayments to 3% would halve the time taken to repay their debt to just over 15 years and only cost interest of £1,257. A spokesman for the group said: "In an environment of rising interest rates where personal debt in the UK has reached a staggering £1,325bn, consumers could now finish repaying their mortgage before their credit card. Despite the introduction of 'health warnings' on credit card statements, the implications of making the minimum repayment each month are still not clear enough." uSwitch is calling on credit card firms to raise their monthly minimum repayments to at least 3%.
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