CHESTER, England, January 22, 2013 /PRNewswire/ --
- Paying off debt in a sensible way can save hundreds of pounds
- Average interest free credit card debt transfer offers is now 23.2 months
With over 32 million* post-Christmas credit card bills expected to hit doormats in January and February, many hard-pressed households will be looking at how they can reduce their debts in 2013. Analysis by MoneySupermarket found that people with an existing credit card debt at an average annual percentage rate (APR) of 17.32, would save £830** in interest alone by switching the debt to a cheaper interest-free credit card deal.
A recent webpoll*** by MoneySupermarket found 44 per cent will be looking to clear leftover 2012 debt, and of this, 14 per cent plan to pay off the built up debt by dipping into savings, and a further nine per cent will only repay the minimum amount off their credit card. A third (33 per cent) will transfer to a zero per cent balance transfer card and an additional 38 per cent will use their income in the next few months to pay off debts.
Credit card users only making the minimum repayments, or sticking with a credit card with a high interest rate will take much longer to pay off the debt and will pay significantly more in interest compared to someone who has moved their outstanding credit card balance to a zero per cent balance transfer card. For example, by moving an existing £3,000 debt to the market-leading 24 month balance transfer card from Barclaycard, and repaying £100 per month over the interest free period, you could save a huge £830 in interest compared to sticking with an existing card with an average market rate of 17.32 per cent APR, paying off the same amount each month.
Kevin Mountford, Head of Banking at MoneySupermarket, said: "For people who are struggling to pay off their credit card debt quickly, the New Year is a good time to take action. Moving leftover credit card debt onto a cheaper deal could save hundreds of pounds in interest. There's a lot of competition at the moment in the balance transfer cards market which will benefit people looking for a better deal. Banks and other card providers have reduced the amount they charge in balance transfer fees, and increased the average length of interest-free period by almost a month than the same time last year.** Using a zero per cent balance transfer card is a no-brainer - it allows you to pay off your existing balance over time without accruing additional interest. I would advise anyone looking to pay off debts to make a plan and budget accordingly; otherwise the debt could remain when the promotional offer comes to an end. Ensure you set up a direct debit for at least the minimum payment as missing a payment would result in you losing the promotional deal.
"If your debts are unmanageable, then speak to your provider or seek immediate help from one of the free debt advice services such as Citizen's Advice or The StepChange Debt Charity who will be able to offer help and advice. If a Debt Management Plan is right for you then ensure you choose a DEMSA accredited provider.
"Unfortunately, the best deals are still reserved for those people with excellent credit histories, so if you are unable to switch to a better deal, assess your outgoings and find ways to pay off the debt as quickly as you can, depending on your circumstances. Reviewing all of your outgoings and seeing where you can make savings can make a difference and help free up cash, which can be used to pay off your debts. Families can save more than £1,000 on all of their household bills by using our site - including energy bills, home and car insurance. Using these savings to pay off the most expensive debt first will help reduce the debt more quickly, although you need to maintain the minimum repayments on all your debts if you have multiple products."
* According to BBA credit card statistics, November 2012, there were 32.4m active credit card accounts in the UK
** Average length of term of top five zero per cent balance transfer credit cards
Date Length Jan-12 22.4 months Jan-13 23.2 months Balance Transfer Cards - 10th January 2013 Provider Introductory Rate Duration BT Fee Rep APR (variable) Barclaycard Platinum with Extended Balance Transfer 0% 24 Months 3.20% 17.90% MBNA Platinum Credit Card 0% 23 Months 2.85% 18.90% NatWest Platinum Credit Card 0% 23 Months 2.90% 17.95% Halifax Credit Card 0% 23 Months 3.00% 18.90% HSBC Credit Card for Existing Customers 0% 23 Months 3.30% 17.90% Average 3.05% Balance Transfer Cards - 10th January 2012 Provider Introductory Rate Duration BT Fee Rep APR (variable) Barclaycard Platinum with Extended Balance Transfer 0% 24 Months 3.20% 17.90% HSBC Credit Card 0% 23 Months 3.30% 17.90% Virgin Credit Card 0% 20 Months 2.99% 16.80% Creation Creation Card 0% 20 Months 3.20% 16.90% NatWest Platinum Credit Card 0% 20 Months 3.20% 17.90% Average 3.18%
Sourced by http://www.MoneySupermarket.com
*** MoneySupermarket webpoll
How will you clear your leftover 2012 debt?
- I'll use my savings to repay the debts - 6.3%
- I will pay it off using my income within the next few months - 16.7%
- I'll transfer my credit card debt with a 0% balance transfer - 14.6%
- I'll pay off my credit card debt making the minimum repayments - 4%
- I haven't thought about it yet - 2.6%
- I don't have any debt from 2012 - 55.8%
Total votes: 1224
Voting ran from Friday 18th January- Tuesday 22nd January 2013
MoneySupermarket.com compares (at 27th Dec 2012)
- 134 car insurance brands and 97 home insurance brands
- 9 broadband providers and 20 energy providers
- 31 unsecured loan and 5 secured loan providers
- 62 mortgage lenders and 26 credit card providers
- 63 savings providers and 38 current account providers.
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