Here in the UK, there are around 48 million adults who, between them, have 75 million credit cards and charge cards. However, one adult in three has no credit card, so there are only about 30.6 million credit-card users in Britain. Thus, a typical cardholder has an average of 2½ credit cards.

What's more, according to the latest figures from the Bank of England, we owe £55 billion on our ‘flexible friends'. Around three-quarters (75%) of this debt is interest-bearing, with the average yearly interest rate being 16.5% APR. Therefore, credit-hungry cardholders are paying nearly £7 billion a year in interest. Ouch!

The menace of minimum monthly repayments (MMRs)
How long does it take to repay an outstanding balance on a credit card? The settlement period depends on two things: the interest rate charged and the level of repayments made. The higher the interest rate, the longer a debt will take to repay. Likewise, the lower the repayments, the longer a debt lingers.

In the early Nineties, all credit cards had a minimum monthly repayment of at least a tenth (10%) of the outstanding balance. In other words, with a debt of £2,000, a card issuer will expect you to repay at least £200 a month. However, greedy lenders realised that lower minimum monthly repayments would hugely boost their profits. Hence, since the mid-Nineties, MMRs have tumbled.

Today, with precious few exceptions, all credit cards require a minimum monthly repayment of between 2% and 3% of the amount owed. Alas, thanks to such low MMRs, a modest debt of, say, £2,000 can take decades to repay...

MMRs: the bad, the ugly and the downright dangerous
The Fool often classifies financial products into three categories: the good, the bad and the ugly. However, when it comes to MMRs, there are no ‘good' cards. Nevertheless, I've sorted 56 different credit-card brands into three groups, using data from the June issue of Moneyfacts magazine:



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