22nd February 2016
Pop quiz! Can you answer the following teaser: If you had a £1,000 balance on a typical credit card with an 18.9% APR, and paid a minimum monthly payment of 2.5% or £15, how long would it take you to pay off?
Is the answer?
(a) Five years
(b) Nine years
(c) Nineteen years,
(d) Twenty-nine years
(e) I don’t know
Debt Advisory Centre posed this question to 1,300 people and found that around 80% didn’t know the correct answer.
Almost a quarter believed it would take between 19 and 29 years to repay the balance in full.
A fifth were more hopeful that it would take just five years to clear the balance. ‘I don’t know’ received the largest number of responses with 38%.
Just a fifth of people chose the correct answer – that it would take nine years to repay a £1,000 balance by making minimum monthly repayments.
With a quarter of people who use a credit card not clearing their balance in full every month, it is concerning that so many consumers do not understand how to calculate how much they are paying back or simply have not used one of the online tools to check this.
The research found that men are more able to calculate repayment periods than women, with over 20% of men and almost 18% of women selecting the correct answer of nine years.
Women are more likely to feel stressed about carrying a balance on their credit card, with 31% saying it makes them anxious and affects their sleep, compared to 22% of men.
Better management of your credit card is one of the best habits to grasp in 2016.
If you are carrying a balance after your Christmas spending, here are some simple steps from the Debt Advisory Centre which you can help to clear the debt faster: