Martin Lewis has issued an urgent warning to everybody with a credit card as they may be able to cut their debt ahead of a predicted rise in interest rates this week.
The MoneySavingExpert founder stated that credit card deals may worsen if interest rates increase. Last month, the base rate rose by 0.5 per cent to 1.75 per cent.
According to money markets, rates could go up to 2.5 per cent on Thursday. This would mark the largest rise in 33 years.
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As reported by The Mirror, Lewis explained in the newest MoneySavingExpert newsletter that credit card deals have been progressively worsening. This is due to the cost of borrowing going up, as it results in banks offer less competitive deals.
Lewis has recommended that anybody who has credit card debt check to see if they could save thousands of pounds by applying for a balance transfer card, which usually come with a promotional period of zero per cent interest.
By moving credit card debt onto one of these balance transfer card, you could halt interest payments for fixed period of time.
Lewis explained: “We're already starting to hear a soft under-chant that deals may get worse quite quickly. So if you need to sort yours out, sooner is safer.
"Can't afford to clear your credit card? You can't afford not to check for a... zero per cent balance transfer.
“A zero per cent balance transfer is where you get a new card to repay debt on other credit or store cards for you, so you owe it instead but at zero per cent."
He added: “As your repayments clear the debt itself rather than cover the interest, you get debt-free much quicker (if you don't borrow more)...”
However, these cards must be used carefully. If not, they could actually add more to your debt.
Firstly, you need to ensure that you are able to clear your debt before the zero per cent interest period ends as if not you will start paying the representative APR.
Secondly, you will need to ensure that you meet your minimum repayments. If not, you may lose the zero per cent interest perk.
Lastly, you should not spend or withdraw cash from these cards as this could result in you losing the zero per cent interest perk.
If you believe a zero per cent balance transfer card may help you save money, you should make use of an eligibility calculator first. This will tell you which cards you may be approved for.
There is such a calculator on the MoneySavingExpert website. This will carry out a “soft credit search” and will not be viewed by lenders.
If you are likely to be approved for one of the cards, it is important to remember that you still may not be given the top rate if it is being advertised as “up to” a set number of months at zero per cent.
Currently, the lengthiest zero per cent balance transfer card available is one Sainsbury's Bank. With this, you could get as much as 34 months interest-free — though only people with very good credit scores will likely be given this long.
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