Making minimum card repayments? You could be paying for a decade longer than you think

Tom Wilson
20 October 2016

Most people underestimate the time it would take to clear a £1,000 credit card debt by a decade if they stick to just the minimum repayment each month. 

According to a poll of over 2,000 people commissioned by Savvy Woman’s Sarah Pennells, 55% of people think it would take no more than seven years to settle the debt – but with most credit cards the borrower wouldn’t actually be debt free until 2033, paying an extra £1,810 interest in the process.

The clearance time assumes fairly typical minimum repayments of 2.5% of the existing balance or £5, whichever is larger, and an 18% annual interest rate, which is a fair representation of most cards.


Ms Pennells says: “Over a million and a half people are only paying the minimum on their credit card balance, and they could be sleepwalking into over a decade of debt. You won’t be debt free for 17 years if you owe £1,000 but even a modest £500 balance would take almost 12 years to clear.

“Credit card companies aren’t going to look out for you if you’re paying the minimum, because the longer you take to pay, the more profit they make from you.” 

The best way to avoid high credit card interest charges is to avoid keeping balances on credit cards, or if they’re necessary, paying off as much of the card debt each month as you can afford.


However, if you must stick to the minimum repayments, it’s worth considering a handful of lenders that set higher minimum card repayments which can make a big difference to the time it takes to clear a £1,000 balance.

Setting a higher £25 monthly repayment (which would be the minimum repayment on a £1,000 balance anyway) instead of £5 will lead to the debt being wiped out a full twelve years earlier, saving £1,340 in the process.

Cards issued by American Express, MBNA, Nationwide, Tesco Bank, and Virgin Money all have a £25 monthly minimum repayment, which will knock years off the time to clear a £1,000 debt, though it won’t make any difference to the amount you pay while the balance is over £1,000.

Card debt dos and don’ts

Here are some top credit card tips:

  • Do: speak to your lender if you’re struggling with debts. The Citizens Advice Bureau, and charities such as Stepchange can help.
  • Do: prioritise paying off your debt over saving and investing. Every pound you pay off is a pound you won’t have to pay any more interest on.
  • Do: consider a 0% balance transfer card to cut the cost of debt. See our {best buys}.
  • Don’t: just look at the 0% period. It’ll cost £120 in fees to transfer £3,000 to a card with no interest until April 2020, but you don’t need to pay anything to switch to a card that charges no interest until November 2018.
  • Definitely don’t: Spend on cards where you’re paying off a big debt. Do this while sticking to minimum repayments and there’s no limit to the total interest you could be charged, and no debt-free date for your calendar either.


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