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`Wiser` use of credit cards could save thousands

02/07/2008

Paying close attention to credit card use may save thousands of pounds in repayments, a finance information provider has said.

Moneyfacts.co.uk expects more people using credit cards for luxuries this summer due to a reduction in disposable income. However, it has warned the costs may add up if only the minimum repayments are made.

Repaying only the minimum required each month may amount to doubling the cost of purchases, the organisation warned.

Moneyfacts.co.uk used the example of spending £3,000 on a credit card with a 15.9 per cent annual percentage rate (APR). If the 2.5 per cent minimum is repaid, an additional debt of over £2,700 will ensue, taking 25 years to pay back.

Offers such as Halifax`s 0 per cent on purchases for ten months may be attractive, the report states, but paying only the minimum could create more debt than other cards.

"Paying just the minimum is very tempting, especially at times like these when many families are struggling, but by doing so you will be storing up additional debt for the future," stated Moneyfacts.co.uk.

This week, Moneyfacts.co.uk also reported the removal of the last personal loan with an APR of under seven per cent.

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