The UK debt crisis is reaching new heights after it was revealed that the extent of some people’s debt is so serious that they will die before paying it off in full.
Moneyfacts.co.uk has looked at the trajectories of a typical debt of £2000 where only the minimum payment is maintained and found that the level of debt that some will be faced with will have them owing money on the balance long after they have died.
In August it was reported that £53.4 billion was owed on credit cards, with 74.3% incurring interest, based on an average rate of 14.9% meaning that card providers are claiming a stake in the £6 billion annual interest bill.
Lisa Taylor, analyst at Moneyfacts.co.uk comments: “Used wisely, credit cards can be a great budgeting tool, but it’s too easy to fall into in the trap of only paying the minimum payment each month, perhaps not realising that this debt could outlive you. The combined effect of rising interest rates and falling minimum repayments means more and more of us will be spreading debt over a much longer period, and in some months not even covering the interest bill with the minimum repayment.”
With over 60% of credit cards currently requiring minimum payments of less than 3% of the outstanding balance, lenders are not doing enough to inform borrowers of the risks involved in taking out such large sum of money. And despite the fact that it is made clear on statements that repaying the minimum amount will spread the debt over a longer period, consumers are slipping further and further into debt.
“Borrowers need to take control of their own credit card destiny: simply by increasing the amount they pay each month, even by a small amount can knock years off your debt. But don’t make the mistake of assuming you are restricted to paying either the minimum repayment or your balance in full. A great way to stay in control is to set up a standing order at a repayment amount you can afford, changing it as and when your circumstances change.
“Don’t line the card providers’ pockets with extra interest and worse still find your credit card debt outliving you. Take control of your credit card debt and save a packet in interest charges.”
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