Citibank and Virgin Money offer customers the chance to choose how to pay off their debt, with lower interest rates

CUSTOMERS racking up credit card debts are now in the driver’s seat, as some banks let them choose how they want to pay off their debt with a lower interest rate.

CUSTOMERS racking up credit card debts are now in the driver’s seat by choosing the period in which they want to pay off their debt — and are being rewarded with a reduced interest rate.

While the nation’s plastic bill remains stubbornly high at $51.9 billion, with nearly $33 billion accruing interest, cardholders can now take control of their own debts and set up a plan on how they want to pay it back.

In a new payment tactic rolled out to card customers that could become more widespread, lender Citibank and Virgin Money is offering them the ability to choose a fixed period to pay off their debt in 12, 24 or 36 months which results in them also securing a lower interest rate around 13 per cent.

Shoppers can set up fixed repayments plan with lower interest rates to help them pay back their debt.

Most card interest rates are around 20 per cent — and the repayment period is unlimited.

The bank’s managing director of cards and loans, Alan Machet, said this new way to pay back debt gives customers put an end to timeless periods to pay back card debts.

“The more customers are in control of their unsecured credit the more they are able to manage their repayments,’’ he said.

“We want people to use this for short-term cash flow, you are booking your holiday and it’s going to take a few months to pay it off so this is a way to do that.

“By making it a discounted rate we are trying to encourage them to stay in control of their credit card balance.”

Citibank head of cards Alan Machet said these structured repayments credit card repayment plans would help consumers take control of their card debt.

The option applies to customers who make one-off purchases over $500 or consequently add multiple purchases together over this value and then select to pay it off on a desired term.

Each monthly repayment includes the interest charges on the money owed.
The recent Senate inquiry into credit cards attacked lenders for making minimum repayments as low as two per cent on cards, which in could leave customers paying off purchases for decades if they paid the minimal amount each month.

Financial comparison website InfoChoice’s spokeswoman Laura Crowden said this new way to pay back card debt was a step in the right direction for cardholders.

ISelect spokeswoman Laura Crowden said these innovative ways to pay back card debt would help customers.

“Credit cards with a fixed repayment option are a great innovation, as they combine the flexibility of a credit card with the discipline and lower rates of a personal loan,’’ she said.

She said it could help consumers budgeting while maintaining a cleaner credit history.

But Rising Tide Financial Services’ managing director Chris Browne attacked this type of payment option and said these types of deals with credit cards were nothing more than a “marketing gimmick.”

“No luxury item needs to be purchased tomorrow, I would prefer people save and use their debit card to buy the same item because there will be no interest,’’ he said.

“Most cards offer interest-free periods anyway.”

There is no penalty for early repayments on the card and no fees apply.