Minimum repayments ‘can lead to prolonged debt’

The practice of suggesting a minimum monthly repayment on a statement can lead to higher credit card debt, it has been claimed.

Many credit card customers are influenced by the minimum amount outlined on bills and make lower repayments as a result, leading to more interest being accumulated, according to new research.

It has been carried out by Dr Neil Stewart from the University of Warwick.

He highlighted the phenomenon of “anchoring”, where numbers can affect people’s decisions.

The minimum repayment acts as an “anchor” and leads to borrowers subconsciously deciding to pay back a smaller amount.

“Virtually all credit card statements include minimum payments. But this consumer safeguard has an unexpected negative consequence,” Dr Stewart commented.

Meanwhile, Halifax has stated that the majority of its credit card customers will continue to repay an average of two per cent each month.

However, those with a low APR – typically below ten per cent – may have a monthly repayment of one per cent.

By Jamie Price


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