Some credit card companies reducing minimum repayment

Recent reports have shown that some credit cards have decided to reduce their minimum repayment levels.

However, this news has been met with criticism from some campaigners and industry experts, as it means that the credit card companies in question could be further contributing to the sky high debt levels in the UK by keeping consumers in higher levels of debt for even longer periods.

One of the credit cards being criticised over reduced minimum repayments is the M&S credit card, which has just been voted best in the Your Money Direct Awards 2007. The M&S credit card has proven popular amongst many consumers, and offers a number of benefits that were highlighted when it was voted the best value card.

However, the card is now reducing its minimum repayment level from 3% to 2.5%, which although may seem attractive to consumers that want to keep down their monthly repayments also means that many consumers will stay in higher levels of debt for even longer.

Barclaycard is another credit card that has decided to cut its minimum repayment level, taking it from 2.5% to 2.25%. Officials from the price comparison website uswitch have stated that these actions will only add to the rising mountain of debt in the UK.

Officials from the site believe that there needs to be a standard agreement where credit cards charge a set minimum repayment level across the board in order to encourage consumers to repay the debt more quickly.

One official from uswitch stated: "In an environment of rising interest rates where personal debt in the UK has reached a staggering £1,325 billion, of which credit card debt accounts for £54 billion, consumers could now finish repaying their mortgage before their credit card, despite the huge disparity in sums borrowed," he commented.

Despite the introduction of 'health warnings' on credit card statements, the implications of making the minimum repayment each month are still not clear enough to consumers. There is little justification for setting minimum repayments at just two per cent and we believe that it is time that the industry agreed a standard minimum repayment amount of at least three per cent on all credit cards.

Tom Smith
31st July 2007