One in five borrowers only make minimum repayment on credit card debt

20th February 2024
paying interest on credit cards

One in five (20%) people only managed to make the minimum repayment on their most recent bill according to research from Compare the Market.

The research shows that less than half of borrowers (48%) are regularly paying off their credit card balance in full each month. This suggests that outstanding balances on cards are increasing as people struggle with the cost-of-living crisis. More than one in four borrowers (26%) admit to paying their credit card bill late. Of these, 66% said they have been late paying their credit card bill within the last 12 months.

As a result of borrowers only making minimum payments, the average credit card debt now stands at £1,160. The Bank of England’s latest Money and Credit data states credit card borrowing has grown at 12.5% year-on-year. Separate card spending figures from UK Finance also show outstanding balances on credit cards have grown by 8.7% over the twelve months.

The research found the most common uses of credit cards are online shopping (52%) and holidays (48%). Going abroad is also a reason that 16% of borrowers took out a new credit card. However, people could be missing out on future savings, as just 23% of people typically use their credit cards on purchases that will earn them rewards such as cashback or air miles.

More than four in ten borrowers (41%) believe the length of the 0% interest period is a key feature when selecting a new credit card. Just over one in five (21%) said the ability to transfer the balance from their old credit card is important, as 37% of borrowers have previously used a balance transfer to avoid paying high interest rates. However, only 37% of borrowers shopped around using a price comparison website to find their credit card, so they may miss out on a card that is better suited to their needs.

Andy Hancock, Chief Growth Officer at Compare the Market, said “Credit cards can be a valuable tool for making purchases. For example, they often come with built-in consumer protection features including Section 75 of the Consumer Credit Act. That being said, when taking out a credit card you have to be mindful of not borrowing more than you can afford. It’s worthwhile paying off your credit card balance in full every month to avoid paying interest.”