Officials have warned that for some people credit cards will work out to be more expensive than having a personal loan. Many people that take out credit cards and use them for their financial needs end up making just the minimum repayments on these debts, but with credit card debts so high this can work out far more expensive than taking out a lower interest loan with set monthly repayments.

Whilst credit cards do offer more flexibility than personal loans, in that borrowers can pay off as little or as much as they want based on their financial abilities as long as they meet the minimum repayment, this also leads to many people that could possibly afford more to still pay only the minimum repayment and give in to the temptation of spending the remainder of the money elsewhere. Ultimately, this means that the debt could last for many years and the amount of interest paid could be crippling.

With a loan consumers have to pay a fixed amount each month for a specified period of time, which makes it far easier to budget and means that the borrower will have a pretty good idea about how much they will be paying each month on their borrowing.

However, with credit cards the temptation to stick to the minimum repayment can lead to borrowers being lumbered with long terms debts and paying huge amounts of interest, with little structure to the way in which they repay their debt.

One industry official said: “Anyone with an outstanding balance should consider switching to a product offering zero per cent interest on balance transfers, allowing them to pay back the debt without incurring further interest.” He added: “Paying back the minimum amount each month will dramatically increase the total consumers pay in the long run.”

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