An urgent warning has been issued to millions of credit card customers over a tweak that could cost THOUSANDS in interest. Credit card holders in the UK are paying thousands extra in interest due to a double whammy of changes amid the Cost of Living crisis.
Those who do not pay off cards in full each month face average interest rates of 25.8 per cent, up from 19 per cent ten years ago, says comparison site Moneyfacts. Sara Williams, from advice site Debt Camel, said: “Many would not have expected paying the lower minimums would mean being in debt for twice as long and pay-ing more than twice as much interest."
Some Barclaycard customers who only make the minimum repayment each month will take an extra decade to clear their debt and pay hundreds of pounds in extra interest after the credit card provider changed its terms. Barclaycard – thought to be the UK’s biggest credit card provider – has written to customers telling them it is cutting their minimum payments to give them “more flexibility”.
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Ms Williams said: "This is likely to generate a lot more profit for Barclaycard.” Check carefully to find out what a credit card providers' interest rates are. Some credit cards may offer you additional rewards and/or cashback for using them.
Credit cards are an example of unsecured debt – i.e. you have not put up your home or car as security against the loan. Ian Dempsey paid thousands of pounds extra in credit card fees when he was stuck paying the minimum amount and told the Sun newspaper this weekend: “People are not aware it can take ten years to pay back and be double what you borrowed.”
The average credit card APR stood at 35.1% in May 2024, according to the latest data from Moneyfacts. A credit card enables you to pay for goods and services up to an agreed credit limit. Unless you can pay off the whole amount owed every month, you will be charged interest on the money you’ve borrowed.
