Card users - don't pay the minimum

Small is not always beautiful. As credit card pro- viders ask for less in the way of minimum monthly repayments on outstanding balances, borrowers might be tempted to think that the heat is off. However, the millions of consumers who only pay back what they have to are in danger of being saddled with hugely inflated debts.

The number of card firms asking for a minimum 3 per cent repayment each month has dropped significantly, reports financial analyst Moneyfacts. In 2001, some 70 per cent of providers insisted on 3 per cent or more, but less than a third do so today.

By lowering their demands, lenders can rake in hundreds of pounds more from lazy or struggling customers because the debt is prolonged.

Borrowers who can afford to pay even just a few pounds extra each month should do so as soon as possible, says Moneyfacts.

"If you're able to go just slightly above the minimum required, you may be surprised at the effect this has on your outstanding debt," says Andrew Hagger of Moneyfacts.

For example, take a borrower who has an outstanding £1,000 balance on a credit card with an annual percentage rate (APR) of 14.9. If he decides to pay back 2 per cent each month - the minimum required - it would take him 19 years and seven months to clear the balance and cost £1,116.01 in interest.

But choose to pay back 3 per cent each month instead and the debt is eradicated in 11 years and seven months at a cost of £545.33 in interest.

Repay 10 per cent each month and the debt is wiped out in less than a third of this time - with just £114 paid in interest.

Of course many people can't afford to make such payments, but the savings are worth whatever effort can be made.

"Extending debt and increasing the interest pay- able doesn't seem a respon- sible approach to lending, especially in the current climate of rising debts, defaults and arrears," adds Mr Hagger.

Meanwhile, banks and lenders continue to raise the interest rates charged on a number of their credit card products to try and recoup revenues lost following a clampdown on penalty fees by the Office of Fair Trading.

Some 19 providers have done so in the past 12 weeks across a wide variety of cards, says Moneyfacts.

One of the latest is Barclaycard: it has raised the APR on its Simplicity platinum card for customers who use the plastic to draw cash from an ATM. The increase is by 12.1 percentage points to 27.9.

Life and Style
love + sex
Life and Style
Tikka Masala has been overtaken by Jalfrezi as the nation's most popular curry
food + drink
News
people
Voices
A propaganda video shows Isis forces near Tikrit
voicesAdam Walker: The Koran has violent passages, but it also has others that explicitly tells us how to interpret them
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Graduate Application Support Analyst

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Reach Volunteering: External Finance Trustee Needed!

    Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

    Christine McCleave: FP&A Analyst

    £36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...

    Recruitment Genius: Sales Executive - OTE £40,000

    £15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

    Day In a Page

    Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

    Climate change key in Syrian conflict

    And it will trigger more war in future
    How I outwitted the Gestapo

    How I outwitted the Gestapo

    My life as a Jew in wartime Berlin
    The nation's favourite animal revealed

    The nation's favourite animal revealed

    Women like cuddly creatures whilst men like creepy-crawlies
    Is this the way to get young people to vote?

    Getting young people to vote

    From #VOTESELFISH to Bite the Ballot
    Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

    Poldark star Heida Reed

    'I don't think a single bodice gets ripped'
    The difference between America and Israel? There isn’t one

    The difference between America and Israel? There isn’t one

    Netanyahu knows he can get away with anything in America, says Robert Fisk
    Families clubbing together to build their own affordable accommodation

    Do It Yourself approach to securing a new house

    Community land trusts marking a new trend for taking the initiative away from developers
    Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

    David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

    The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
    With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

    Money, corruption and drugs

    The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
    America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

    150 years after it was outlawed...

    ... America's first slavery museum is established in Louisiana
    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
    Tony Oursler on exploring our uneasy relationship with technology with his new show

    You won't believe your eyes

    Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
    Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

    Moores must go. He should never have been brought back to fail again

    The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
    War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

    The battle for Mosul will unleash 'a million refugees'

    Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn