According to CreditCardComparison.org.uk a UK based credit card information and comparison website, several consumers struggle to pay the minimum monthly payment on their credit cards and are not likely to accept the UK Government’s proposal to double the minimum monthly payment. The government’s proposal aims at reducing the amount of debt that consumers carry each month. However, this means that consumers will need to pay more every month. This will enable them to clear their debt quickly and save on interest payments.
According to the Department of Business, Innovation and Skills, even an increase of 3% will reduce the time taken to clear credit card debt. For a £1,800 debt, a consumer will take 40 years to clear the amount through minimum monthly payment each month. It would also cost £4,000 more at the current rate than it would if the rate was set at 5% of their debt.
Christopher Rohan of creditcardcomparison is of the opinion that the increase which requires consumers to pay more than double their current payments could create a snowball effect which could lead them deeper into debt. Critics of the proposed law stress the fact that additional measures would need to be adopted for consumers that won’t be able to cope with higher credit card payments.
The Government’s proposal raises a number for questions. The government needs to ponder over the fact whether an increase in monthly payments would help or educating consumers on the advantages of making larger payments whenever possible, is better. The law could be looked at as an infringement upon the rights of consumers, who are actually responsible for their own finances and determining the amount they can spend on their credit cards. Those who do handle their finances well are left in a tight spot by having to pay more, and cannot be expected to bear the brunt for those who cannot cope with payments.
The UK Government’s proposal is still in its nascent stage. Whether the proposal will actually be passed remains to be seen. No date has been determined as yet. Meanwhile, Christopher Rohan believes that those who cope with their monthly minimum payments need to take a closer look at their budget and clear off their dues as early as possible by paying larger installments.
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