Minimum Credit Card Payment “fixation”
Unsecured debt levels are on the increase due to a “fixation” about minimum repayment levels, according to new research by the University of Warwick.
Many credit card customers are influenced by the minimum repayment amount which is stated on their credit card bills. This influences the amount which is paid, as many opt to make the minimum payment instead. This could be great news for credit card companies though, as they could receive almost double the amount of interest because of this trend.
Psychology researcher Dr Neil Stewart said: “Virtually all credit card statements include minimum payments. But this consumer safeguard has an unexpected negative consequence: minimum payments distort the behaviour of many customers in a way that increases interest charges and increases the duration of their debt.”