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25 years to pay off the average credit card debt

The average credit card debt per household is £2,293. If you made only the minimum repayment each month it would take more than a quarter of a century (25.4 years to be exact) to repay this debt, The Money Charity has calculated.

Minimum repayments are often set very low. Yet since they are often a percentage of the total debt, the amount you repay reduces each month.

As you're making smaller payments it will take longer to repay the debt - and the amount you owe increases as there is longer for the interest to add up.

What is the average interest rate on credit cards?

18% APR (Annual Percentage Rate)


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Dealing with credit card debt

Even if you only pay a small amount a month on top of your minimum payments it can make a huge difference.

The minimum repayment on average credit card debt would start at £56, and reduce each month. However, if you paid a fixed £55 every month, the debt would be cleared in around 5 years and 4 months – a full 15 years faster.

Balance transfer credit cards

Another option is to move to a balance transfer credit card. These cards offer a period in which no interest will be charged on your debt. This means all your repayments go directly towards reducing the size of your debt.

You will need to pay a fee to transfer your debt, which is usually around 3% of the balance transferred. These cards are usually only an option if you know you have a good credit rating.

It is also a good idea to set up a Direct Debit to your credit card repayments to ensure you never forget to pay.

Debt or savings – which should you focus on?

With lots of talk on the importance of having savings, it can be difficult to know what to focus on first.  You will rarely be able to earn more on your savings, than you will pay on your borrowings. So, as a rule of thumb plan to pay off your debts before you start to save.

Generally it’s fine to save and have some debt as long as you’re keeping up with your mortgage payments; paying off your credit card bill each month and you don’t have other loans or credit commitments that are costing you more in interest than you could earn on your savings.

 

 

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  • Iain / 17 January

    I consider myself pretty up on all of this sort of stuff. But I actually learnt something from this

  • Margaret Ennis / 17 May 2015

    This brings home the reality of credit card debt but provides a practical solution which is doable.