You and your credit card bill

January 4th, 2012

New research suggests that credit card users are likely to pay less towards their debt if their monthly bills display information about the minimum amount required. The research, published in the Journal of Marketing Research found that including the minimum required payment information on their credit card statements can reduce the amount they pay towards their bill by as much as 24%.

The CAI has been campaigning for a change in the way consumers are presented with information in their monthly credit card bills. As it currently stands, lenders only provide consumers with the minimum monthly amount they must pay towards their bill. However, what most consumers don’t realise is that paying just this amount guarantees they will remain in debt to the bank for several years, even for relatively small outstanding amounts. Take the example of an outstanding credit card balance of €1,000 which is being charged at an 18% interest rate. By making a minimum payment amount of €25 per month on this balance, it will take a massive nine years and eight months to get back to zero and cost over €900 in interest.

The CAI believes new rules should be introduced compelling banks to clearly set out to consumers exactly how long it will take to clear a credit card balance by making the minimum payment alone. We have written to the Minister of Finance requesting that he obliges banks to do this and we will continue to lobby strongly until it become a reality.