In an age when credit becomes easier and easier to get hold of, more people are getting stuck in a debt cycle facing a lifetime of debt, it has been warned.
Research carried out by Moneyfacts.co.uk has shown that credit card debt in particular can take years to clear due to minimum payments.
Lisa Taylor, analyst at Moneyfacts.co.uk, explains: “The combined effect of rising interest rates and falling minimum repayments means more and more of us will be spreading debt over a much longer period and in some months not even covering the interest bill with the minimum repayment.”
Comparing the minimum repayment rates for a variety of credit cards, Moneyfacts.co.uk revealed that over 60 per cent of credit cards require minimum payments of less than three per cent of the outstanding balance.
While acknowledging that the repayment period and interest rates can vary widely between credit cards, the financial comparison website shows that by simply paying the minimum repayment it could still lead to years of needing debt advice.
Also today, Moneyfacts.co.uk has outlined that loan rates have taken a “real battering,” with the finance comparison website highlighting a total of nine providers increasing interest rates by four per cent on some tiers.