Simple switch could save customers more than £1,400 | Personal Finance | Finance
Millions of Britons struggling with punishing interest charges on credit cards could save hundreds of pounds with a simple switch. Shifting outstanding debt using a balance transfer to a new card with zero interest will dramatically cut the total owed while allowing people to clear the money owed in monthly instalments.
Millions of Britons have increased their spending on credit cards through the cost of living crisis, even using the cards to cover food and other essentials.
However, this has left them open to paying APR interest rates of as much as 30 per cent, which can add hundreds of pounds to the original debt.
Experts at TotallyMoney have identified how credit card customers can put an end to paying interest for up to 29 months for a small processing fee of between 2-4 per cent by shifting their debt to a balance transfer card.
It said someone with a typical outstanding balance of £2,901 on an interest rate bearing credit card could save £1,471 by transferring the debt to an interest free balance transfer card for 29 months.
There are strict affordability and eligibility checks on people applying to transfer credit card debt. But even people with a less than perfect credit score might be eligible for a 16-month card. This would offer an interest saving of £736, while those with poor credit scores might still be able to save £370 over nine months.
Chief executive of TotallyMoney, Alastair Douglas, said: “If you’re paying interest on your credit card each month, then you should consider a balance transfer.
“It’ll stop you from paying interest, so you can focus on repaying your debt. You could save hundreds if not thousands of pounds.”
What is a balance transfer credit card?
Balance transfer credit cards could be a useful option if you have debt spread across a few different cards or soaring interest rates.
They allow you to move the balance from other cards onto a new one, and you pay no interest for a set period.
This means your debt is easier to pay off because money saved on interest can be used to put toward clearing the debt.
How to find the best deals
Always use an eligibility calculator before applying as this gives a good idea if you will be accepted without leaving any record on your credit file. This avoids the risk of someone getting a black mark on their credit record by making multiple applications.
The best cards currently available include one from Tesco Bank which is offering a 29-month long 0 percent interest deal with a 3.49 percent fee.
Lloyds Bank is also offering up to 28 months at 0 percent with a fee of between 3.45 percent.
To assess all the available cards, visit price comparison websites like MoneySavingExpert’s Cheap Credit Club or Compare the Market.
If your application is approved, you will need to transfer the balances within a set period, usually around 60 or 90 days. Your old balance will then be cleared and you can start making interest-free repayments on your new card.
