Increasing direct debit on cards a good debt management solution
Increasing direct debit on cards a good debt management solution
Tuesday 26th May 2009
Huge credit card bills can be overwhelming but opting to pay back the least amount possible means that you will spend a long time in the red, according to moneysupermarket.com.
Debts can be paid off in a faster and cheaper way by making larger payments instead of the minimum direct debit amount, with those paying back ten per cent instead of two per cent on a £1,000 balance at 16.9 per cent APR managing to be debt free in just a year.
While they will only have paid £79.16 in interest, their counterparts paying back two per cent will be faced with a £151.74 interest bill and will still be in debt.
According to Peter Harrison, credit card expert at moneysupermarket.com, consumers should take measures to ensure their debt is minimised including stepping up payments on months where there is some extra cash.
"Most banks will allow you to set your direct debits at the minimum repayment amount or more, and if you opt to increase your repayment amounts you will reduce your debt and the interest paid significantly," he said.
"Even if you are with one of the few lenders that won't allow you to set your direct debit higher than the minimum repayment, you can set up a standing order at a larger monthly amount."
The total consumer credit lending to individuals at the end of March 2009 was £232 billion, according to figures from Credit Action.
News article brought to you by Debt1 – UK debt management specialists.
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