Are You Paying A Lot More Than You Need To On Credit Card Debt?

Credit card interest is set to cost UK consumers around £19.3 billion this year, according to new analysis from FCA authorised lender Updraft.

Broken down, this works out at around £342 for every adult in Britain. The lender’s analysis, based on Bank of England and Office for National Statistics data, says the average person now has £1,400 in credit card debt, with many paying higher rates than necessary because 82% of balances are not consolidated.

Why Are People Paying More Than They Need To?

Many borrowers keep credit card balances on higher interest cards, even when lower cost borrowing could be available to them. Updraft says 82% of credit card balances are not currently consolidated, leaving millions paying extra interest every month.

Its analysis also says around 47.5% of credit card spending accrues interest. Once interest starts building, monthly repayments can do little to bring the balance down, especially when repayments stay close to the minimum amount.

People making only the minimum repayment can spend years clearing what they owe. Using a £1,400 balance and an annual percentage rate of 24.65%, Updraft says it can take more than a decade to repay the debt, with borrowers paying almost as much in interest as they originally borrowed. UK Finance data used in the analysis also says around 6% of credit card holders make only the minimum repayment each month.

Aseem Munshi, Founder of Updraft, said, “For many people who are only able to make minimum repayments, a significant share of monthly payments can go towards interest rather than reducing the underlying balance. Over time, this can create what we describe as a ‘Debt Drain’ effect, where interest accumulates, and balances reduce more slowly. As a result, the total cost of borrowing can build significantly over time relative to the original debt.”

So, What Can Borrowers Do?

Updraft says people worried about debt should first speak to a free advice service before making any financial decisions.

Munshi said, “Free, impartial support is available from organisations including StepChange, Citizens Advice, and National Debtline, which can help individuals understand their options and, where appropriate, arrange structured repayment plans.”

Paying more than the minimum repayment can also lower the overall cost of borrowing. Munshi said, “Where possible, paying more than the minimum repayment can reduce overall interest costs and shorten repayment timelines, although this may not be feasible for everyone depending on financial circumstances.”

Debt consolidation may also lower interest costs for eligible borrowers. Munshi said, “Combining multiple debts into a single repayment can simplify finances and may reduce interest costs, depending on eligibility and personal circumstances.”

Updraft says consolidation will not suit everyone and that the total amount repaid depends on the interest rate, the repayment term and just personal circumstances. A longer repayment frame can also leave borrowers paying more interest overall, even when the interest rate is lower.

How Has Credit Card Borrowing Changed Over Time?

Updraft says the average annual cost of credit card interest per adult has gone from £188 in 2021 to £342 in 2026, using Bank of England and ONS data.

Looking over the last decade, average credit card debt per adult went from £1,223 in 2015 to £1,399 last year. During the same period, the average credit card interest rate has gone from 17.58% to 24.65%, according to Bank of England data.

The lender also says the average amount paid in credit card interest per adult has gone from £215 in 2015 to £345 in 2025. Higher borrowing costs mean more of each repayment goes towards interest before reducing the balance.

What Could Happen Over The Next Few Decades?

Updraft forecasts total UK credit card debt will reach £79 billion by the end of 2026, with annual credit card interest payments reaching around £19.3 billion.

Using historic growth rates between 2021 and 2026, the lender says annual credit card interest payments could reach £25 billion by 2037. Its projections also say total UK credit card debt could reach £100 billion by 2053, with average debt per adult reaching £1,503 by 2054.

Updraft says these projections use historic growth rates and do not take account of policy decisions, interest rate movements or changes in borrowing behaviour. Even so, the analysis shows how leaving balances on higher rate credit cards for long periods can leave borrowers paying much more interest than they expected.