Late payments are costing UK credit card users a total of £150 million in fees, according to research. Calculations by price-comparison site Confused.com indicate that a quarter of borrowers have been charged for a late payment at some point during the past year, while 1 in 12 have been charged three times or more.
For some it’s just a question of forgetting to pay on time, while for others, pressure on family finances makes it hard to fund a payment, let alone clear the whole balance. But a spokesperson for debt portal Beatmydebt.com suggests that those who can’t afford to pay back what they’ve borrowed each month should “think very carefully” before taking on credit card debt at all.
Many recommend setting up a monthly direct debit to make the minimum required payment each month. That has to be sensible advice, given that more than half of us currently rely on paying our bill by other methods, making a slip-up all too easy.
But this isn’t the whole story. Interest rates on credit card debt are comparatively high, with an average rate of 16.69% according to recent figures from the Bank of England. That’s 33 times the Bank’s own base rate. According to one calculation, a relatively modest credit card debt of £3000 charged at a High Street rate of 17.9% could take as long as 40 years to pay down to zero if only the minimum payment were made each month – longer than most mortgages.
With mortgage interest rates at historic lows, it has to be worth taking another look at your credit card and other borrowings. It may be that by remortgaging could bring your debts under one umbrella and simplify your finances. And a loan secured against your home could also help you reduce your monthly outgoings – taking some of the pressure off that family budget.
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