Britons waste £150m a year on late credit card payments

Britons are watching £150 million go down the drain each year on late credit card payments, new research by Confused.com reveals.

Each of the 33,465,075 active credit card accounts in the UK have been charged an average of £12 in the last 12 months, which amounts to £150 million in late payment fees.

Out of the 2,000 credit card holders interviewed, one in four have been charged at least once in the last year for failing to pay minimum payments, while 8.5% have been charged three or more times in the same time period.

The price comparison website also discovered that 57.5% of credit card holders have not set up a direct debit agreement to pay off their bills.

With credit card companies charging on average £12 each time a minimum payment is missed, these fees can quickly pile up.

Alex Higgs, a commercial analyst at Confused.com, said: “Collectively we are wasting millions of pounds each year on charges, money which would be better spent elsewhere in these tough financial times.”

Confused.com is urging credit card users to set up a direct debit to avoid forgetting to pay minimum amounts.

Young credit card holders aged between 18 and 24 are most likely to miss a minimum payment but they are the best at setting up direct debit, with 52% having one in place.

While the 55 plus age group had the fewest charges in the last 12 months, they are the worst at setting up a direct debit, with 83% relying upon memory.

Missing payments can have a more damaging effect than consumers may realise, according to Alex Higgs: “Many credit card holders who miss minimum payments are likely to lose out on attractive introductory deals or low interest rate offers, meaning more money is wasted as they are reverted onto higher rate deals.

“It can also affect a customer’s credit profile, which could have negative effects for future borrowing.”

The revealing figures come just after the government’s announcement that it will launch a review of the consumer credit markets, and personal insolvency.

With average interest rates at their highest since February 2002 and growing talk of poor customer experience, some experts are warning against using credit cards altogether.

Kevin Still, debt expert and director of debt solutions provider, Atlantic Financial Management, said: “Bad perception of credit card providers comes as a direct result of poor consumer experiences and those are evident in all the tabloids.

“The Bank of England interest rate is at its lowest, yet credit card interest rates are the highest they’ve been in eight years.

“The small print continues to bamboozle consumers on promotional offers, and stealthy changes to contractual terms once you are a customer with a debt balance are legendary.”

UK personal debt stood at £1,460bn at the end of May and total consumer credit lending came in at £220bn according to the latest statistics from debt charity, Credit Action. .

Kevin Still added: “Many clients have credit cards sold by the high street banks where they have their current account and yet when the chips are down, it counts for nothing. So food for thought as to why clients despise them.”

Source: debtmanagementtoday.co.uk