The report, examining the nation’s attitude towards credit card debt, found that Brits are sticking their heads in the sand over their debt, with unrealistic expectations about the years it will take become debt free.
- Britain’s 30 million credit card holders have an average debt of £4.5k, paying back at an average interest rate of 17.9 per cent.
- 66 per cent of credit cardholders are paying interest on their balance each month, with one in five (20%) choosing to pay only the minimum amount each month.
- By paying off only the minimum amount each month, it can take up to 17 years for someone to pay off the average debt of £4.5k, with the borrower paying back more than double the original debt.
- Worryingly, over half (55 per cent) of credit card holders in the UK don’t even know the interest rate on their credit card balance.
Debt age crisis
- The research suggests that Brits are unrealistic when it comes to paying back their credit card debt, believing it would take them an average of just 3 years and 11 months to pay off their current credit card debt.
- Less than 3 per cent of borrowers expected to be paying off their credit card for more than 16 years, with only 13 per cent expecting it to take more than a decade to become debt free.
Debt stress
- Nearly two thirds (61 per cent) admit that their credit card debt is unmanageable.
- Over a quarter (26 per cent) reported feeling overwhelmed by their credit card debt, whilst one in seven (14 per cent) said they worried constantly about their mounting debt, yet little is being done to change the situation.
- One in five (20 per cent)respondents to the survey claim they have trouble sleeping due to keeping up with credit card payments
Over one in six (18 per cent) admitted their credit card debt had caused arguments with friends and family.
- To highlight the debt age crisis, Zopa has created a video to show credit card holders the long-term effect of their borrowing. Using prosthetics and make-up, credit card users were made to look the age they will be when their current credit card debt has finally been cleared.
Giles Andrews, CEO and Co-founder of Zopa commented:
“Everyone should be aware of their ‘debt age’, and understand more about how long it will take to pay off credit card bills or loans under their current situation.
“By paying just the minimum interest on their credit cards, Britons are becoming part of a debt age crisis. Consumers could end up still paying off existing their credit cards even when they are collecting their pensions.”
“Zopa is empowering borrowers to tackle their debts head on in order to become debt free much sooner. By offering borrowers rates typically less than half the purchase rates of their credit cards, Zopa allows people to side-step the banks and credit card companies and pay less interest in order to get debt free sooner.”
Personal finance expert Mike Naylor commented:
“It is clear that credit card debt can have a seriously damaging effect on a person’s wellbeing, which only gets worse the more is owed and the longer it takes to pay off. A peer-to-peer loan can offer lower interest rates that won’t increase, fixed repayments and the flexibility to pay off debt with no early repayment charges. With a loan, borrowers get a set end date when the debt will be cleared and it could help them manage their debts more effectively.”
“It is shocking that more than half of credit cardholders don’t know how much interest their credit card charges. I would urge anyone with a credit card to take a good look at their debts, work out how much they owe, what interest rate they are paying and see if there are alternative options to clear their debts. It’s essential that anyone struggling with debt seeks free debt advice from Stepchange, National Debtline or Citizens Advice to make sure they are dealing with their debts effectively and to see if they have other options.”
