When you buy a £1,000 TV on a credit card and pay it off slowly, that TV does not cost £1,000. Depending on your interest rate and monthly payment, it could end up costing you £1,500 or more.
Our True Cost of Credit Calculator reveals the hidden price tag of borrowing. Enter the purchase price, your credit card APR, and how much you plan to pay each month to see the shocking reality of compound interest.
True Cost Calculator
Find out the real price of your purchase.
The Minimum Payment Trap
Credit card companies set the minimum payment incredibly low — usually around 1% to 2.5% of the balance plus that month's interest. This is not designed to help you clear the debt; it is designed to keep you in debt for as long as possible, maximising the bank's profit.
If you buy a £2,000 sofa on a card charging 22% APR and only ever make the minimum payment, it will take you over 20 years to pay it off, and you will pay more than £2,500 in pure interest. That £2,000 sofa actually cost you £4,500.
The rule is simple: if you cannot afford to pay off the purchase in full at the end of the month, and you do not have a 0% purchase card, you cannot afford the item.