The £40,000 cost of borrowing on credit cards

Calculate how much interest you've paid on your credit cards - the final bill could be bigger than you thought possible.

Do you know how much interest you've paid on your credit cards since you got your first bit of plastic?

Most of us have probably never bothered to find out. After all, it would involve quite a lot of work collecting together all your statements, which probably go back several years, then identifying the interest charges and adding them all up.

Someone who did go to the effort was Samantha Womack, the former EastEnders actress. When she was interviewed by The Sunday Telegraph last year, she said: "I don't use credit cards now. I had them as a young adult and I didn't even look at the interest rate.

"So when I was older and I had all my leftover statements, I totted up how much interest I'd paid and felt physically sick."

In fact, figures collated by this newspaper suggest that many borrowers end up wasting almost £40,000 in interest on credit cards. Often they will have taken out other forms of unsecured borrowing, such as personal loans, overdrafts and payday loans, so the total interest bill will often be even higher.

A typical borrower who has got into difficulty by spending too much on credit cards has amassed outstanding debts of £23,000 by the time they seek help, one of Britain's leading debt charities said. And the eventual interest bill can easily exceed that figure by the time all debts are paid off.

"The Debt Advice Foundation receives calls from a huge range of people struggling with debt. Among those who have got into difficulty with retail spending, a typical caller with credit cards would have three to five of them, with outstanding balances totalling around £23,000," said Linda Isted from the charity.

"If they agreed to make the minimum repayment to pay off this debt over 10 years, at interest rates of, say, 18pc (a conservative figure), they would pay £24,172 in interest more than doubling their outstanding debt and enough for a deposit on a modest-sized house in most towns."

She added that the same callers would typically also have two overdrafts, running to between £2,000 and £4,000 each. Many would also have a payday loan.

But the charity's figures cover only the period after the borrower has asked for help. Interest would have been mounting up well before then, of course. If we assume that the spender took out a new card every year for five years, spent about £5,000 a year and made only the minimum repayments, the total interest bill over the period comes to about £12,000, Andrew Hagger of MoneyComms calculated.

This brings the total interest bill, from the time the first card was taken out until the last penny of debt was paid off, to more than £36,000.

Mr Hagger said: "Credit cards are a very useful financial tool to help you manage with short-term unexpected cash-flow problems, but can become a huge drain on your budget if used as a means of long-term borrowing.

"It's easy for people to turn to their plastic if they have spent out before payday, but it's a dangerous strategy to follow month in month out, as gradually a greater proportion of the amount you pay back each month will be swallowed up by interest charges."

Ms Isted added: "Short-term credit is promoted with cartoons and comforting headlines for a reason very few of us look beyond the best-case financial scenario.

"We are all being encouraged to have now and pay into the future when was the last time you heard anyone say they were saving up for a new sofa, or to change their car? Which is fine, as long as we understand the implications, can afford the repayments and make sure we have some emergency backup.

"But family finances are like small businesses; they are complex and need proper budgets, regular reviews and contingency funds. And how many of us really have the skills or make the effort to do that?"

Wasting £40,000 in interest payments to banks is enough to make anyone feel sick. If you want to get a grip on your debts, follow these tips from Citizens Advice.

1 Take action as soon as you think there may be a problem. There's a lot you can do to help yourself, so don't bury your head in the sand make sure you look at your options as early as possible.

2 Don't borrow more to pay off your existing debts. It may seem tempting in the short term, but all you'll do is leave yourself with even more to pay off.

3 Some bills are even more important than credit cards. "Priority" creditors include mortgage lenders or landlords, the council tax authorities and gas and electricity companies. If you don't pay these, you may be in danger of losing your home, having your power cut off or even ending up in court.

4 Work out a household budget. You can use this to see where your money goes and where you could make savings, and find out how much you can realistically afford to pay back each month.

5 Contact your creditors. If they know you are having difficulty with repayments, you may be able to work out a manageable repayment plan.

6 Shop around to make sure you're getting the best deal on your energy bills, mortgage and other essentials.

7 Get free, confidential, independent advice from your Citizens Advice Bureau. It will help you work out repayments and negotiate with your creditors, and also help you keep out of debt in the future. For more information, go to the Citizens Advice website, adviceguide.org.uk .