Lower minimum payments means twice the interest warns research

A widespread shift in the credit card industry towards lowering the minimum level that has to be paid back monthly may seem like a good thing at first glance.

But new research has warned that the reduction – now down to as low as two per cent across 50 credit cards – is extending our debt and the overall interest that we pay.

Paying just one per cent above the minimum level will slash the lifetime of a debt by 14 years, said Nick White of uSwitch, which conducted the research.

"Our investigation indicates that as credit card debt has gone up by £7 billion over the last two years and Britain's personal debt increases by £1 million every four minutes, lenders have simultaneously become less stringent about their repayment requirements," he said.

"By reducing the minimum repayments to a level that make credit cards seem more affordable and allowing customers to repay smaller amounts each month, borrowers are retaining their debt over a much longer time frame and paying more interest."

The total interest payable over the lifetime of the credit card balance can also be halved by just paying three per cent instead of the minimum two, said uSwitch.

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