Mike Barry, chief executive of Blackpool Fylde and Wyre Credit Union (BFWCU) has welcomed Labour’s vow to cap credit card interest rates – but insists more still needs to be done to help Britons trapped in a debt spiral.
“The proposals, which would see Labour limit the amount lenders can charge in interest, are a step in the right direction. However, this alone won’t solve the debt crisis affecting three million people.
“Part of the problem is low monthly repayments mean debts can take decades to clear, meanwhile people continue to use cards and find themselves in a vicious circle of persistent debt.
“If somebody spent £5,000 on a standard credit card aged 30 and repaid through minimum payments, they would be nearing retirement age and paying more than £7,000 in interest before the debt finally cleared – totalling £12,000 to borrow £5,000.
“If the interest cap was accompanied by a mandatory increase in minimum payments, cards would be repaid faster and it would encourage people to consider more carefully before running up card balances.
“People who have already found themselves in the eternal credit card repayment trap should seek alternatives, such as a Credit Union, and find out whether they are eligible for an affordable, fixed term loan.
“This would allow people to clear their credit cards, reduce the interest, and have a fixed end date for repayments within the next few years. The trick then is to close the credit card accounts and not fall back into the debt spiral.”