Endowment policy cash could put a stop to minimum credit card repayments

Publication date | 08/03/2010

Households that are battling with credit card debt can lower the amount of interest repayments they have to meet by simply paying off a little bit more every month, it has been suggested.

Putting an extra £20 a month towards clearing a typical credit card bill could see the balance repaid 17 years earlier and overall interest reduced by a third, according to moneysupermarket.com.

However, increasing repayments could prove difficult for those households that are juggling a number of financial commitments and find repaying the minimum amount on debt the easiest option.

Chris Radford, chief executive officer of aap, the UK's biggest buyer of endowment policies, said some of its customers with credit card debt had decided to raise the money required to clear their balances by selling their underperforming endowment policies.

Clearing credit card debts as soon as possible

The average annual percentage rate on credit cards continues to rise and moneysupermarket.com has revealed the extent of how debt can increase pressure on a household for the long term.

An outstanding credit card balance of £1,989, for example, would take 22 years and ten months to be repaid if the minimum of 2.5 per cent every month was repaid.

However, clearing an extra £20 a month would reduce this period by more than 17 years - resulting in the balance being cleared in five years and seven months.

While many Britons will understand the importance of paying more than the minimum, a plethora of other monetary commitments could make it difficult to put more income towards debt than already goes towards this expenditure.

Commenting on this issue, credit card expert at moneysupermarket.com Peter Harrison said: "We know that times are tight for many households and some credit cardholders may just be repaying the minimum amount every month as a way of trying to minimise their outgoings."

Selling your enowment policy could give you credit card freedom

Mr Radford, from aap, said some of its customers had decided to sell their unwanted endowment policies to raise the money needed to be able to clear their credit card debt, rather than continuing to make minimum repayments.

He added that should aap make an offer to purchase an endowment policy, it will always pay more than the surrender value offered by the insurance company.

Reasons to sell your endowment policy