Credit card debt 'never ends'

TUESDAY, SEPTEMBER 26, 2006

Since the Office of Fair Trading forced creditors to lower their default fees, many have increased interest rates.

Though the Office of Fair Trading recently made credit card suppliers lower their late charges, they have retaliated by upping interest rates significantly, according to financial expert moneyfacts.co.uk.

More bad debts and loss of revenue after they were forced to drop default charges to £12, has resulted in many credit providers raising their interest rates by as much as 12 per cent.

For those who already have a large amount of debt on their credit cards, the rise in interest rates could have long-term repercussions.

Lisa Taylor, analyst at moneyfacts.co.uk, said: "Not only are providers increasing rates, but over the last five years we have seen a dramatic reduction to the minimum repayments required.

"In 2001, around 70 per cent of card provider's stipulated minimum repayments of at least 3 per cent; today only 30 per cent of lenders require a monthly repayment of this amount or greater."

Allowing debtors to owe money over a more extended period is not a responsible approach to lending, especially when debt is rising as fast as it is, added Ms Taylor.

Making payments at even a slight bit more than the minimum of what is required, could have a substantial impact on one's debt, according to moneyfacts.co.uk.

At the end of July 2006, the overall amount of personal debt in the UK stood at £1,237 billion.