Friday 28 October 2011

Why your Christmas debts could last until 2023

Consumers could end up paying for Christmas 2011 far into 2023 by making only the minimum repayments on their credit card.

credit cards - Why your Christmas debts could last until 2023
Clearing a balance can take years if you make only the minimum repayment each month 
With just two months to go until Christmas, many people may be tempted to fund this year's festive spending on their credit card.
However, figures from Moneysupermarket.com show that consumers with a balance of £500 on a card with an average APR of 18.12pc could take 11 years and eight months to clear their debt if they make only the minimum repayment of 2.5pc each month – forking out an extra £477 in interest payments in the process.
Kevin Mountford, head of banking at moneysupermarket, said: "It's no surprise that a number of people will dread funding Christmas this year, with the rising cost of living, and energy, fuel and food costs all squeezing people's wallets over the past 12 months. The festive period is an expensive time of year and many may be thinking about using their flexible friend to tide them over this season."
According to figures from the Bank of England, consumers have racked up a £57bn bill from credit cards but increased competition in the market will give many borrowers time. For instance, credit cards from Tesco Clubcard and M&S Money are interest-free for 15 months on purchases.
For those consumers able to pay off their balance in full each every month, a cashback or rewards card could be a good option as it gives them rewards each time they spend.

Fact 







































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The American Express Platinum Cashback credit card, for instance, offers up to 2.5pc cashback for the first three months up to a maximum of £100, followed by an ongoing cashback rate of 1.25pc.
A balance transfer war has broken out and some card providers allow people to transfer existing debts and pay 0pc for up to 22 months, subject to a small handling fee. Once this period is up you need to repay the debt or transfer it again – otherwise you risk paying a high interest rate.
However, shoppers should avoid using a interest-free balance transfer card for their shopping as these cards are designed for transferring existing debt and, despite many having zero per cent offers for purchases, these offers last only for a few months before purchases accrue interest at the standard rate.
The best cards for balance transfers are Halifax's Balance Transfer MasterCard and Barclaycard Platinum Extended BT Visa, which both charge 0pc for 22 months.
"Setting up a direct debit for credit card repayments is essential - consumers should avoid missing payments at all costs, as this would lose them their promotional offer," said Mr Mountford.
"The decision to use a credit card shouldn't be taken lightly and careful budgeting is essential to ensure people can pay off their Christmas debt quickly, and within the next 12 months, or, as our findings show, they could be left paying for Christmas 2011 for many years to come."


By The Telegraph 

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