November 16, 2009
Don’t Risk Credit By Avoiding Unsecured Debt
Research from moneysupermarket.com has found almost a third of credit card users have no intention of paying off the balance of their credit card in the next six months.
If you have unsecured debt, you have to consider consolidation or at the very least plan a means to pay off the risky debt as soon as possible – the longer you are saddled with unsecured debts, the more you will suffer in the future.
The website says those carrying a £2,000 balance on a card with an industry average rate of 18.21% APR, who split the repayments equally over six months, will incur £144.19 in interest payments. Longer term, those who borrow over 12 months would pay £188.79 in interest.
If those borrowers were to consolidate their debt, their interest rate would be just a fraction of what it is now. That means they could save more and work towards paying off all their debts instead of keeping their head above water.
Peter Harrison, credit cards expert at moneysupermarket.com, says: “People must be extremely careful about carrying debt on credit cards for long periods of time – you don’t want to be paying for this year’s presents when the Christmas decorations are rolled out again next year, particularly as rates could be at dizzying heights.
He says that with interest rates rising on many cards, minimum repayments often only barely cover the interest accrued on the debt – by paying just the minimum borrowers could spend most of their life paying a credit card company a monthly sum on a debt as small as £500.
Harrison adds: “Those with credit card debt should look at ways to reduce the outstanding balance on their card, especially as providers have been known to increase APRs for longer standing customers.”
SOURCE: Moneysupermarket.com, 09/11/09
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