Credit card users who only pay off the minimum required amount each month are in danger of building up "stubbornly high" debts that they cannot pay off, the Irish Financial Services Regulatory Authority (IFSRA) warned yesterday.

The consumer watchdog's second survey of the Irish credit card market highlights the risks of falling into the "minimum payment trap" by showing the case of a cardholder who only makes minimum payments on a debt of €4,000.

If the cardholder misses the due date for his payment on three occasions and is charged one unpaid item fee when his cheque bounces, after 12 months the dent he has made in his outstanding debt could be as little as €23.

MBNA cardholders who only pay the minimum amount will have the highest outstanding balance, still owing €3,977 after a year.

This is largely because the company only requires customers to pay back 2.25 per cent of their outstanding balances each month.

By contrast, AIB demands that its customers pay back at least 5 per cent of their balances each month. Despite having a higher interest rate on its standard card than MBNA, a cardholder making minimum repayments will slash his debt by €1,526 in 12 months.

IFSRA said the lower minimum repayment amounts gave people more financial flexibility, but meant that debts could take longer to repay.

MBNA cards, which are also sold through One Direct and Ryanair, have by far the most punitive charges for late payment fees and unpaid item fees, making its cards the most expensive for cardholders who have less than perfect repayment records.

MBNA charges €15.24 for each late payment, compared to just €3.81 at AIB. Bank of Ireland, National Irish Bank and Permanent TSB do not have such a charge.

MBNA's charge of €19.05 for unpaid item fees is also significantly more costly than the next highest fee, which is €8.50 at Ulster Bank.

Around half of all cardholders pay off their credit card balances in full each month. The percentage of those who only make minimum repayments is thought to be less than 5 per cent.

"Our main message to consumers is that credit cards are not suitable for long-term borrowing and people should be aware of the long-term impact of repaying only the minimum amount each month," said Ms Mary O'Dea, IFSRA's consumer director.

Ms O'Dea also welcomed the introduction of chip and PIN credit cards, which are designed to prevent card fraud.

Copies of IFSRA's credit card survey are available at

www.itsyourmoney.ie, by phoning its lo-call helpline on 1890 777 777, or by visiting its consumer information centre at College Green, Dublin.