Minimum Repayments

Credit cards in the UK have become increasingly popular over the years, and millions of consumers enjoy the convenience and ease of using these cards.

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When it comes to repayment of your credit card balance there are a number of options.

You can pay the balance off in full each month, which is always the best option as it means that you will not be charged any interest by the credit card company, yet you can continue to earn any benefits, such as rewards, offered by the card issuer for using the card. A second option is the spread the balance over a period of time, and repaying as much as you can afford each month until the balance on the card is cleared.

Another option when it comes to repaying the balance on your credit card is to make minimum repayments each month, which will be stipulated by the credit card company on your monthly statement, so you will know how much each minimum repayment is.

Credit cards ask for around 2.6% of the total outstanding balance as a minimum repayments, although many have now started lowering the level of the minimum repayments, which some are now setting at just 2% of the total outstanding balance. However, many experts have warned that those sticking to the minimum repayment day in and day out will find that they could be in debt for many years.

Making minimum repayments on your credit card may seem like a good idea in order to leave you with more in the way of monthly disposable income, but you need to remember that making the minimum repayment also means that you will have to cope with years of debt.

Credit card companies want to keep their customers in debt for a long as possible, and setting low minimum repayments enables them to do this with customers that stick to the specified minimum repayment. This is why it is so important to make sure that you make more than the minimum repayment on your credit card balance whenever you can.

Paying the minimum monthly repayment on your credit card could also mean that in addition to having to repay the debt off for decades to come you may also be stuck with having to pay huge levels of interest to the card issuer, which means that minimum repayments could prove more troublesome and expensive than you might think.

Many people get stuck into a rut of making minimum repayments on their credit card balances, with many failing to realize that they could be repaying their balance for decades in some cases by making just the minimum repayment.

Credit cards charge a notorious amount of interest, and therefore is you make only minimum repayments you will find that the vast majority of the amount that you pay will go towards interest, with only a fractional amount going towards paying off the principal debt. This is why it can take such a long time for those making minimum repayments to clear their balance, and why experts urge consumers to pay off as much of their balance as possible each month rather than sticking to the minimum repayment.

Although some people may find it difficult to repay their credit card balance in full each month, it is well worth trying to pay more than the minimum repayment as this can make a big difference to the amount of interest that you pay as well as to the amount to time that you will be in debt for.

Paying just 1% or so more than the requested minimum repayment could slash the amount of time that you will spend trying to pay off the balance, and can reduce the amount of interest that you repay by a significant amount.

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