Loans co-operative's credit card warning
With Christmas over for another year, many people’s thoughts will now be turning to the January credit card statements landing on their doormat.
A West Midlands not-for-profit savings and loans co-operative is warning residents that only making the credit card minimum repayments could trap them in debt for years.
Steve Barras, Development Manager of Just Credit Union, said: “As the Christmas spending credit card statements start to arrive, it can be very tempting to make minimum repayments.
“What most people don’t realise is how long it will take to pay off and how much interest they will pay. If you borrow £3,000 on a credit card and make minimum repayments it could take over 25 years to repay - and you will pay back thousands in interest!”
He went on: “The minimum repayment is the lowest amount you must pay each month - failure to pay on time usually results in a fee and a missed payment can damage your credit score and your ability to get future credit.
“The minimum payment is usually a percentage of your outstanding balance and is typically around 1-2.5% of how much you owe or £5-£25 - whichever is higher.
“The minimum repayments must at least cover the interest so your balance will fall each month, provided you don't spend more. However, as your debt reduces so does the amount you pay.
“This means it takes longer to clear, and the longer you borrow for, the more interest you are charged. With any debt, the best option is to repay it as quickly and cheaply as possible. Minimum repayments do the opposite making debts last for longer and making more money for the banks.
“Borrowing £3,000 and repaying the minimum amount - and with no further spending on the card - would take 27 years with an interest cost of £4,000. This is based on £3,000 debt with a typical rate at 17.9%, with minimum payments of 1% of the balance plus interest.”
Steve Barras added: “Just Credit Union is a community-based alternative. We are a not-for-profit savings and loans co-operative run for the mutual benefit of its members and not for the profits of shareholders.
“We want you to pay off your debts as quickly and cheaply as possible and start to build some savings.
“With a Just Credit Union affordable loan there are no hidden charges, arrangement fees or early repayment penalties and you even get FREE loan protection insurance (conditions may apply). You can borrow up to £15,000 with repayment periods from three to 60 months. We will also ensure that the repayments are affordable.”
Just Credit Union is available to anyone who lives and works in Shropshire, Telford & Wrekin, Worcester, Herefordshire. Wyre Forest, South Staffs, Stafford Stoke-on -Trent, Newcastle Under Lyme and Malvern Hills and you can find out more by visiting their website justcreditunion.org
