Credit card providers 'should introduce standard minimum repayment threshold'

The decision of two major credit card suppliers to reduce their minimum monthly repayment levels has been met with criticism.

According to uSwitch, M&S Money – which has reduced its minimum repayment from three per cent to 2.5 per cent – and Barclaycard – which has cut its minimum repayment from 2.5 per cent to 2.25 per cent – are contributing to the growing debt mountain in the UK.

By reducing the minimum monthly repayment level, uSwitch argues, credit card providers are subjecting customers who choose to take advantage of the option to pay the absolute minimum amount – currently around one in ten – to a ‘debt sentence’ of almost 30 years.

As a result, Mike Naylor, personal finance expert at uSwitch, believes that there should be an agreement which introduces a standard minimum repayment amount to ensure debts are repaid more quickly.

"In an environment of rising interest rates where personal debt in the UK has reached a staggering £1,325 billion, of which credit card debt accounts for £54 billion, consumers could now finish repaying their mortgage before their credit card, despite the huge disparity in sums borrowed," he commented.

"Despite the introduction of ‘health warnings’ on credit card statements, the implications of making the minimum repayment each month are still not clear enough to consumers.

"There is little justification for setting minimum repayments at just two per cent and we believe that it is time that the industry agreed a standard minimum repayment amount of at least three per cent on all credit cards."