More than half of credit card holders currently have an outstanding balance with a third currently paying interest on this balance - on average £121.40 a month, equivalent to £1,456.80 a year. Of those UK credit card holders not paying interest, 68% say they pay their balance in full every month and just 31% are making use of credit card deals, according to research from MoneySuperMarket.
Credit card users aged between 35 and 44 were found to have the largest outstanding balance on their credit card, with an average of £1091.80. Meanwhile, over half (54%) of Gen Z (aged 18-24) are currently paying interest on their outstanding credit card balance, at an average cost of £211.20 a month. The 35 to 44’s came in second (45%), followed by 25 to 34’s (43%) and 45 to 54’s (37%).
Those Gen Z who avoid paying interest every month were found to be most likely to make use of interest free balance transfer deals (32%) and interest free money transfer offers (36%), showing they may be more credit-card savvy than most. In contrast, the vast majority (85%) of those aged 65 and over who managed to avoid paying interest did so by paying their balance in full every month.
The research also found that Northern Ireland paid the most in interest on their cards, with nearly two thirds (63%) paying interest on their outstanding balance at a cost of £207.90 per month on average.
Jo Thornhill, money expert at MoneySuperMarket, said: “With the cost of living crisis becoming a growing concern, it’s time for us all to make sure we’re getting the best out of our personal finances. It starts with how we manage credit cards. When used carefully, credit cards can be a great way of helping to spread the cost of purchases and can help you get on top of your finances. However, too many Brits are paying interest on their cards when they needn’t be - particularly when there are so many good deals out there in the market.
“Balance transfer cards are a great option for those looking to clear their debt. With this type of credit card, you can transfer your existing balances onto one low or 0% rate card, consolidating your debt all in one place at a lower interest rate. By transferring to a 0% rate card you could also avoid paying interest for up to two years, just be careful when it comes to the end of your interest-free period though, as you could end up paying much higher charges.
“Alternatively, for those looking to build up points for everyday spending, a rewards credit card might be the best choice. Used wisely, these can be a great way to earn money back on your daily expenses. Be wary of any charges and fees however, and make sure you pay your balance off every month, or you’ll pay high rates of interest. You could also risk lowering your credit score because ratings agencies consider factors like whether you pay your bills on time when determining your score.
“If you want to avoid paying high interest rates altogether, a low rate credit card might be best for you. These are great for reducing the amount of interest you pay, but be warned, their low rates often only apply to purchases and not cash withdrawals.
“There are many other great credit cards currently on the market. Make sure to do your research."
