If you have a credit card, there is a chance that you are throwing thousands away.
This is because of your APR – or annual premium rate - which on average is 29.8%. This rate determines how much interest you pay when paying off outstanding card balances.
Those who are paying off cards over a long period of time could find themselves missing out on hundreds, or even thousands, of pounds, reports the Mirror. On top of this the interest rates could make an already long process even longer.
As an example, say you had an outstanding credit card balance of £1,000 and you were paying £50 a month to clear it. It would take you until January 2025 to pay it off, and you would have paid an extra £332 interest during this time.
There is a simple way to slash credit card interest - and pay nothing at all on top of what you owe.
Check if you can move your credit card debt to a 0% balance transfer card. The idea is that you shift your existing credit card debt onto a new card that comes with a 0% period for a set amount of time.
This means you pause all interest payments while you’re paying the amount on the new card - so you become debt free quicker.
0% balance transfer cards - what you need to know
These cards need to be used responsibly, otherwise you could end up adding to your debt. First of all, you need to make sure you can clear the debt before your 0% interest period finishes or you’ll start paying the representative APR.
You also need to always make your minimum repayments, otherwise you risk losing the 0% interest perk, and check if there are any fees involved when transferring your debt. Finally, you should avoid spending or withdrawing cash on these cards as you’ll often lose the 0% period - and the fees can be expensive.
If you think a 0% balance transfer card could work for you, use an eligibility calculator first to check which ones you are likely to be approved for. MoneySavingExpert has a 0% Balance Transfer calculator which carries out a “soft credit search” and won’t be seen by lenders.
If you’re likely to be approved for one, keep in mind you may still not get the top rate if it is being advertised as “up to” a set number of months at 0%. The longest 0% balance transfer card available right now is from Sainsbury's Bank, where you could get up to 34 months interest-free.
The lender charges a fee of 2.88% or 3.88% fee - or a minimum of £3 - to make the transfer. Only those with excellent credit scores are likely to get the longest number of months advertised.
However, you may not necessarily need the longest length of time to pay off your debt, so it’s best to check how long you’ll likely need. There may be shorter cards available with cheaper, or sometimes no fees.
For example, NatWest and Sainsbury's Bank also offer 22 months at 0% for existing customers with zero fees involved - so you'll save money if you can clear the debt in that time.
Rachel Springall, finance expert at Moneyfacts, said: “As has been the case for many years, the best 0% balance transfer card for someone may not be the one with longest interest-free offer, as there are credit cards out there with low balance transfer fees or even charging no fee.
“Not every borrower will be eligible for a headline grabbing deal, but it’s always wise for consumers to check their credit score before they apply.
“If customers are struggling to keep up with their repayments amid the rising cost of living, they would do well to seek help from a debt advice charity.”
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