Card tricks

Credit cards are a useful way to balance your income and expenditure. But they are a very expensive way of borrowing money over a long period. Take a typical card with an APR of 17.9%. If you keep a debt which averages £1000 on that card for a year it will cost you £179 – or £3.44 every week – just to pay the interest. And you will still owe £1000! Even if you stop borrowing and pay back the minimum the card provider asks for each month – often as little as 2% with a minimum of £5 – it will take you an astonishing 25 years to pay it off. Over that time you will have paid £1800 in interest – almost twice the original debt!

So here’s a plan. Cut the card up now. Look at what you are paying back each month. On that card it would be £20.28 (most of which is interest). Start a standing order to pay that much each month and cancel your direct debit. If you can afford that now you can afford it in the future. That will pay the debt off in seven years and save you more than £1000 in interest. Even better is to make a bigger standing order. In the example if you double it to £40.56 that would cut the repay time to two and half years and save more than £1500 in interest.

In future make sure that if you borrow money to buy something the debt does not last longer than what you bought. So pay off your Christmas bills before next December. Pay for that holiday before you are tempted by another. And make sure that fashionable outfit is paid for before it goes out of style!

If you have problems with debt contact the free charities www.nationaldebtline.co.uk 0808 808 4000 or www.cccs.co.uk 0800 138 1111.