Related Credit Card Article

"Lower monthly repayments could lead to longer credit card debt and more interest"

By admin | December 23rd, 2008 | Credit Cards

A recent report has highlighted how millions of consumers could face many decades of credit card debts and could be left paying a fortune on their credit card balance due to changes being made to their required minimum repayments.

The changes are being made by Halifax for its millions of customers, who are being told that they do not have to pay as much by way of a minimum repayment. The minimum repayment has been halved from its original 2% level but this could leave many saddled with huge credit card debts.

If customers decide to go ahead and make only the minimum required repayment industry officials are concerned that they could face a lifetime of credit card debt, and could end up paying huge sums of interest to Halifax.

The lender, on the other hand, is set to make millions of pounds extra from the interest that will be paid on the outstanding balances of people that make small repayments on their balances. Someone with just a £5000 credit card debt could be paying off the debt for over eighty years and pay more than £30,000 in interest if making only the minimum repayment.

An official from MBNA, which also previously changed its repayment requirements, stated: ‘We would never encourage someone to pay off just the minimum, and this is clearly stated on the customers’ statement – it will take them longer to pay and cost more in interest. The minimum is just that, the minimum amount to fulfill your contractual obligations. Customers have the option to pay anything from the minimum up to the full balance.’

Another industry official spoke about the Halifax credit card changes, stating: ‘Complex changes to terms and conditions can cause confusion. On closer inspection, it doesn’t seem that all customers will benefit from this change and some people would be better off under the old minimum repayment.’

Tags: credit card debt, monthly payments

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