Money 'health warning' on all credit card bills

Credit card firms will be forced to spell out the full cost of repaying debt under Tory plans announced today.

Bill statements will be required to show borrowers how their debt would balloon if they made the minimum repayment each month.

The "prominent" warning will also make it clear how long paying off the bill would take. The Conservatives hope to encourage people to borrow more responsibly and banks to lend at more competitive rates.

The number of people in England and Wales declared insolvent in the first three months of this year soared to almost 30,000, up nearly 20 per cent on the same period last year.

Debt education charity Credit Action reports the average British adult now owes £4,840 on credit cards and other unsecured personal loans.

But 3.4million people, many under 35, only make the minimum repayment each month says financial website USwitch. The Tories calculate someone with £3,000 on a 17.9 per cent interest rate credit card who makes a minimum payment of two per cent each month will take 41 years to clear the debt and pay £6,300 in interest.

The policy forms part of a drive by the Tories to help consumers control their finances. The party has said it will launch a free national financial advice service, costing £50million and will introduce a cap on store card interest rates.

Shadow chancellor George Osborne said: "These policies will help consumers make more informed financial decisions. They are also beneficial for the financial services sector, which writes off billions of pounds of personal loans a year."