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If you've built up credit card debt, clearing it should be at the top of the agenda. But do you know how long it would take you to become debt-free? According to research from Debt Advisory Centre, few people know the answer…
The figures show that few people are able to correctly calculate how long it would take to clear a balance of £1,000 (based on a typical APR of 18.9%) when making minimum monthly payments of 2.5% or £15. The overwhelming majority (80%) guessed incorrectly: almost a quarter believed it would take 19 or 29 years to repay the balance in full, while an optimistic fifth thought it would take just five years.
'I don't know' received the largest number of responses with 38%, while just a fifth chose the correct answer, that it would take a full nine years to repay a £1,000 credit card balance by making minimum monthly repayments.
This lack of awareness could mean people end up paying far more than they expect, and with a quarter of those with credit cards not clearing the balance in full every month – and 10% paying only the minimum monthly amount – the extra interest could soon add up.
If you don't want to be paying off £1,000 for the best part of a decade, there's only one thing for it – you need to get into better credit card habits, and that all comes down to paying more than the minimum each month.
Paying more than the minimum, even if it's only a few pounds extra, can minimise the amount of interest added to your debt and can help you clear it faster. Remember that careful management is key, and that missing a repayment isn't an option – doing so will add penalty fees to your balance (giving you even more debt to pay off) and will give you a black mark against your credit rating, too, so it simply isn't worth it.
However, a truly beneficial option could be to opt for a 0% balance transfer credit card. This will only be an option for those with a decent credit history – use a credit check provider such as Experian Credit Expert to see if yours is up to scratch – but if you're eligible, it can make the world of difference.
You could have over three years to repay the balance in full without needing to worry about interest adding to the bill, and if you work out how much you need to repay each month (divide the total balance by the number of interest-free months your new deal offers, and voila!), you'll be able to comfortably clear it within the timeframe.
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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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