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Credit card holders should pay a pound, says uSwitch

Mon, 20 Feb 2006

Overpaying credit card bills by £1 a week could save British credit card holders billions of pounds, according to a price comparison website.

The UK's 3.4 million credit card holders that regularly only repay the minimum amount due on their credit card bill could save an estimated £4.2 billion if they put £1 a week towards their credit card debt, says switching service uSwitch.

This could shave 13.5 years off the repayment term of a credit card balance, uSwitch calculates.

"In a climate of high interest rates and falling minimum repayments, for some people there is now the possibility that they could finish paying off their mortgage before they pay off their credit cards," points out Nick White, the head of personal finance at the website.

He says lower minimum repayments on credit cards make them seem more affordable to people who might be unable to afford borrowing on credit cards.

If credit card holders are planning to only make the minimum repayment on a credit card, they need to consider "the true cost" of their borrowing and the length of the credit card agreement that they are entering into, Mr White adds.

This period could be reduced considerably, he advises, if credit card holders set up a standing order with their bank and pay an extra £1 towards their credit card bill every week.

uSwitch also found that the total interest on a credit card that requires only two per cent minimum repayment is double that of credit cards of which a minimum of three per cent of the balance needs to be repaid every month.

The website points out that credit card balances will also take nearly double the amount of time to repay on the two per cent minimum cards as on the three per cent credit cards.

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