One in 10 cardholders 'not paying off debts'

07 December 2011 16:01:41

The right credit card can help people to reduce debts.

New research has revealed that millions of people are just making the minimum repayments on their credit cards and not managing to pay off any of their debts. Insolvency trade body R3 found that one in six people with unsecured debts - including 11% of credit card holders - are so-called 'zombie' debtors and are only paying back the minimum required. The findings highlights the importance of seeking out low-cost borrowing options, such as a balance transfer credit card, to reduce the long-term cost of borrowing.

'Zombie' debtors on the rise
The number of 'zombie' debtors who are failing to tackle their debt has increased in recent months, according to the latest research from R3. The organisation found that one in six people with unsecured debts are only managing to pay the interest on their debt, rather than paying off the debt itself. This includes 11% of credit card holders who are just paying back the minimum required each month.

R3 Frances Coulson expressed concern at the finding. She commented: "We hear talk of 'zombie' businesses, but seeing individuals run their finances in the same way is troubling. 'Hanging on' each month simply cannot be maintained forever. This group will have very few options should interest rates rise or their circumstances change."

0% credit card could help
People who have found themselves in this situation could benefit from going online to compare credit cards. Those with large credit card balances should consider applying for a balance transfer card that offers a lengthy interest-free period. This will enable them to avoid accruing interest while they slowly chip away at the debt itself.

Consumers who regularly rely on their credit cards to pay for products and services should consider taking out a 0% purchase card, as this will give them several months interest-free on new purchases. However, they should also consider seeking advice from a debt charity, as using a credit card for day-to-day purchases is unlikely to be sustainable in the long term if they cannot see a way of paying off their balance. 

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