Billions being ‘burnt’ by interest payments

British consumers are effectively burning away their own money by adding to savings accounts while at the same time paying off interest on their credit card debts, a new study has made clear.

Figures from Fool.co.uk show that as much as £3 billion is being squandered annually in this way by UK credit consumers who are not managing their debts effectively.

The average Briton sets aside around £300 in some sort of savings vehicle on a monthly basis, but many people are simultaneously paying out hundreds of pounds in credit card interest payments, the financial comparison firm reports.

David Kuo, head of personal finance at Fool.co.uk, commented: “We are often told to put aside money for a rainy day because having a ready source of funds for emergencies is a sensible thing to do – and it is.

“But it makes little sense to have a stash of money earning interest at six per cent a year when a pile of debt is burning a hole in our finances at 15 per cent annually.”

The average amount of interest paid out by a British adult stands at around £29,000, according to data from Credit Action.