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4 in 5 Brits are unsure about how long it takes to clear credit card balances

27th March 2015 Print

80% of UK adults are unable to identify the true cost of borrowing money on a credit card, according to new research conducted on behalf of.

When respondents were asked how long they thought it would take to clear a £3,000 balance on a typical 18.9% credit card if they were making £50 fixed monthly payments, two in five (42%) admit they have no idea. Nearly a quarter (23%) think it would take just five years and 11 months to clear the balance, when in reality it would take more than twice that time. Just one in five (20%) know that it would take an estimated 11 years and 11 months to pay the full balance off by making £50 payments every month. One in seven (15%) actually overestimated how long it would take to clear the balance, as they think it would take over 25 years to pay off.

Similarly 80% of respondents were unsure how much interest they would pay in total while attempting to clear the £3,000 balance credit card with £50 monthly payments. Almost half (48%) admit they don’t know how much interest they would have to pay, with one in five (21%) thinking they would accrue less than £403 in interest charges. Only a fifth (20%) of respondents knew that the total interest paid over this period would be approximately £4,120. One in eight (12%) think it would cost over a staggering £14,200 in interest.

Ian Williams, spokesman for Ocean, says: “It is concerning that so many people don’t really understand the true cost of using their credit card. Whilst most people do aim to clear the balance in full, paying just the minimum each month, or slightly more, can see you paying off your credit card balance for many years.”