Many facing a lifetime of debt

An analyst at Moneyfacts.co.uk has commented that many people are not realising that their debt could outlive them. Credit cards are useful if used wisely but many fall into the trap of only paying the minimum payment each month.

Falling minimum repayments and rising interest rates mean people are spreading debt over a longer period of time with some months not even covering the interest bill with the minimum repayment.

Moneyfacts.co.uk added that generations have changed, years ago credit was in short supply so people saved to make large purchases. Nowadays, people see credit as a necessity to pay for day-to-day living expenses instead of living to their means.

However, by depending on credit cards to increase income, it’s easy to get caught in the debt cycle, consequently resulting in a lifetime of debt.

It was reported in August that £53 billion was owed on credit cards, with 74% incurring interest, based on an average rate of nearly 15%. It is easy to see that it’s a profitable business for the card providers, taking a piece of a £6 billion annual interest bill.

Moneyfacts.co.uk advise managing credit sensibly, a good way to control finances is to set up a standing order at a repayment amount that is affordable and altering it when circumstances change. By increasing the amount paid each month, no matter how small, can knock years off debt.

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