Credit card borrowers have been urged to shift their debts in order to save money on interest payments.
One in two credit card customers are paying interest on their balance each month, with the average balance increasing by 8.3% in the past year.
As the cost-of-living crisis continues to squeeze household finances, paying the interest eats away at borrowers’ disposable income, making it more difficult to escape debt.
However, experts at TotallyMoney calculated that a borrower carrying the average interest-bearing credit card balance of £2,901 could save £1,417 by moving their balance to a 0% interest balance transfer credit card.
Balance transfer cards offer interest-free debt repayments for a set period of time. The best deal currently available is from Tesco Bank which offers 29 months at 0% interest. The card comes with a 3.49% balance transfer fee.
Those with a less-perfect score might be eligible for a 16-month card with Virgin Money, saving £736, while those with a poor credit score might still be able to save £370 over nine months by switching to Fluid.
Alastair Douglas, TotallyMoney CEO and personal finance expert, 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.
“Always shop around to find the best offer for your own circumstances. This means looking at different comparison sites and going directly with the banks. Check your eligibility before applying, and keep an eye out for offers which come with pre-approval, guaranteed credit limits, guaranteed rates, and guaranteed 0% offer durations. That way you’ll know if you’ll be accepted before you apply, and you can be totally sure that you’ll get exactly what was advertised.”
Douglas added that you shouldn’t be put off if you’re not eligible to transfer your full balance.
“You can still move some of the money, so you can stop paying interest on that amount. Managing two payments might make it a bit more difficult, so it could be a good idea to set up direct debits,” he said.
He added that balance transfers are designed to help you stop paying interest, and so “it’s important you try not to use it for spending”.
“That includes making purchases with the card, and withdrawing cash from the ATM. Otherwise, you’re likely to be hit with high rates, and cash advance fees, which might make it even more difficult to manage your money and get out of debt,” he said.
Related: Cut through the jargon: YourMoney.com’s credit card glossary
