This week is panic week.
The week when we panic-buy those extra presents (just in case she buys me one), that extra food (can't have too many mince pies) and drink (come on, it is Christmas after all). That extra ton of tinsel and kilometre of lights.
And the panic-buyer's best friend is their credit card. Knowing you can panic-now pay-later makes it all too easy to slip those extra goodies into the basket.
But how much will credit card debt cost you if you only make the minimum repayment on your card?
Test how much you know with this simple question, taken from Martin Lewis's brilliant money saving site.
Your New Year's resolution is to stop borrowing, but you've still £3,000 on a credit card at 17.9% interest. How long will it take to clear if you're making the minimum monthly repayments (the higher of 2% or £5)?
A. In two Christmases time
B. In eight Christmases time
C. In 14 Christmases time
D. In 41 Christmases time
Think about it before scrolling down for the answer.
|Mmm...shouldn't have stuck all those presents on my visa card.|
The Correct Answer is: D. In 41 Christmases time
Staggeringly if you only make the minimum repayments it’ll take over 41 years to repay the card at an interest cost of £6,300. Minimum repayments are designed to keep you in debt. Think about it 17.9% interest a year is about one and a half percent a month – the minimum payment is 2%, so you’re not doing much more than servicing the interest.
Further Info: See the money saving expert's full Minimum Repayment Calculator which includes a guide to beating the trap.
If this doesn't apply to you but you know someone who needs help keeping their spending under control, a copy of Sheconomics could be the prefect present.