- moneysupermarket.com research reveals more than three out of ten credit card users don't plan to repay their outstanding balance for over six months
- Credit card users must clear Christmas debts as soon as possible as interest rates are set to rise
Credit card users aged between 20 and 29 are the least likely to be paying off their debts in a hurry, with 38 per cent content in holding an outstanding balance on their credit card for more than six months, and just a little over a quarter (26 per cent) paying off their credit card balance in full each month.
With shops beginning their Christmas push in earnest, consumers buying presents on a credit card could find their iPod, Xbox and Nintendo Wii end up costing them far more than they realise. Those carrying a £2,000 balance on a card with an industry average rate of 18.21 per cent APR, who split the repayments equally over six months, will incur £144.19 in interest payments. Longer term, those who borrow over 12 months would pay £188.79 in interest.
Anyone thinking of borrowing on a card for a period of time to fund a particular Christmas gift should think about the real cost of a product once the interest has been added. For example, a Nintendo Wii and Wii Fit which retails at £219.99 would actually cost £240.56 if financed over 12 months.
Peter Harrison, credit cards expert at moneysupermarket.com, said: "Today's news on soaring bad credit card debt, coupled with our research findings, set a very worrying scene.. People must be extremely careful about carrying debt on credit cards for long periods of time - you don't want to be paying for this year's presents when the Christmas decorations are rolled out again next year; particularly as rates could be at new dizzy heights.
"With interest rates rising on many cards, minimum repayments often only barely cover the interest accrued on the debt. By paying just the minimum borrowers could spend most of their life paying a credit card company a monthly sum on a debt as small as £500.
"Those with credit card debt should look at ways to reduce the outstanding balance on their card, especially as providers have been known to increase APRs for longer standing customers. One way for borrowers to reduce their interest payments is by taking out a card with a zero per cent introductory offer on balancer transfers, affording them a better opportunity to clear the debt.
"Consumers should use a credit card for purchases over £100 as these purchases are protected under Section 75 of the Consumer Credit Act should anything happen to the goods; but borrowers should aim to pay off the item immediately or as soon as possible."
Actual Cost of Products using a Credit Card
|
Present |
Retail Price |
Actual Cost after 9 months |
Actual Cost after 12 months |
% Increase after 9 months |
% Increase after 12 months |
|
Nintendo Wii with Wii Fit |
£219.99 |
£235.77 |
£240.56 |
7.17% |
9.35% |
|
Sony Playstation with 60 GB HDD
and choice of two games |
£259.99 |
£278.50 |
£284.43 |
7.12% |
9.40% |
|
Samsung NC10 Notebook |
£259.00 |
£277.38 |
£283.26 |
7.10% |
9.37% |
|
iTouch 32 GB |
£229.00 |
£245.46 |
£250.24 |
7.19% |
9.27% |
Sourced by www.moneysupermarket.com 06.05.2009
-Ends-
Notes to editors:
* Opinium Research carried out an online poll of 2008 British adults on behalf of moneysupermarket.com from 29th September and 2nd October 2009. Results have been weighted to nationally representative criteria
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