It takes 31yrs for average Brit to repay his credit card debtSeptember 4th, 2008 - 2:08 pm ICT by ANI
London, September 4 (ANI): Customers who rely on plastic to make purchases may take about 31 years to repay their credit card debts, according to a new study.
Pointing out that four out of ten credit card providers ask for just two per cent minimum repayment, the price comparison website uSwitch suggests that the decision of banks to allow their customers to pay back less as a minimum each month over the last year is part of a strategy to recover lost profits from the credit crisis.
Though this may sound attractive to hard-pressed borrowers, a report on the website reckons that around 3.4 million consumers will be left in debt for years to come if they pay back so little.
The report calculates that it will take 30 years and 11 months to repay the average outstanding amount of 1,384 pounds on each card, if a customer pays back just two per cent each month.
Recent data from the Bank of England shows that customers have started to borrow increasing amounts on their credit cards again, and that they are turning to plastic to fund every day purchases.
The report says that credit card providers have been attempting to make more money out of their lower risk customers by reducing the minimum repayment levels, which secures more interest repayments from their customers.
“With the cost of living on the up and people being forced to tighten their purse strings, consumers will be more tempted to just make the minimum repayment on their credit cards and spend the cash on more pressing bills, the Telegraph quoted Simeon Linstead, head of personal finance at uSwitch.com, as saying.
“However, those that opt to manage their credit card debt in this way could end up paying far more than they need to for every purchase made. This type of repayment barely touches the balance and in the majority of cases just covers the interest incurred,” Linstead added. (ANI)