Credit card debt 'could be longer than mortgage'

Consumers who use their credit card for a holiday could be paying for the trip until 2030 if they only make the minimum monthly payments, uSwitch.com has warned.

The online price comparison and switching service said 40 per cent of all credit cards only require a minimum monthly repayment of just two per cent, or around £5.

Although this may sound like an attractive deal, it could prove very costly, uSwitch.com said. For example, flying to Beijing for six nights would cost an average of £739.

However, by paying for this on a credit card and making the minimum repayment would take 22 years and three months to pay back. Interest will total £1,324 – almost double the cost of the holiday.

Paid off this way, the average 25 year mortgage will be repaid in 2033, the average credit card balance of £1,384 will be repaid in 2039.

In the last 12 months, the minimum repayment index from uSwitch.com reveals the average repayment required has fallen from 2.65 per cent to 2.54 per cent, a fall of 0.11 per cent.

With credit card spending is increasing by an average of £179 million quarter-to-quarter in the last year, and with over one in ten credit card holders (11 per cent) making the minimum repayment each month, this could spell extra debt for consumers, uSwitch added.

Simeon Linstead, head of personal finance at uSwitch.com, said: "With the cost of living on the up and people being forced to tighten their purse strings, consumers will be more tempted to just make the minimum repayment on their credit cards and spend the cash on more pressing bills.

"However, as our research has revealed, those that opt to manage their credit card debt in this way could end up paying far more than they need to for every purchase made.

"We urge the credit card industry to set all minimum repayments at three per cent, we have long been calling for this, and it is long overdue."

Sarah Routledge