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Soaring credit card charges pose long-term debt risk

Consumers could be sidled with debt for decades because of soaring credit card charges and cuts to minimum repayments, new figures indicate.

Interest rates on credit cards have risen to an 18-month high of 19.1 per cent, according to Moneyfacts.

It means someone with a £5,000 debt on a card repaying one per cent each month will repay an additional £692.

At the same time, a handful of lenders have reduced minimum monthly payments, meaning consumers could take a lot longer to clear their debt.

Some banks have reduced minimum repayments from the normal 2.5 per cent to one per cent or £5. The difference between paying off one per cent or 2.5 per cent is huge in the long run as interest mounts for longer.

Moneyfacts finance expert Rachel Springall said: "Since last year, the majority of credit card lenders allow their customers to pay as little as one per cent of the original debt each month, which means card holders will be taking longer to repay their balance and are incurring interest for a longer duration."

Meanwhile, transferring the balance to another card will still incur credit card fees. For example, a debt of £5,000 would cost £200 to move with a four per cent transfer fee.

Jennifer Haines

Jennifer's speciality knowledge is credit card changes and balance transfers.ADNFCR-2776-ID-801493744-ADNFCR

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