A balance transfer is when you move your existing credit card balance to a new card with a 0% period, so you stop paying interest on the debt and if you are not paying this you’ll clear your credit card debt more quickly
Brits facing credit card debt could potentially save hundreds of pounds a year by following this one tip, according to credit reporting agency Experian.
New research shows more people have been searching for ways to pay off debt quickly this year, with the most popular way being 0% balance transfer credit cards with searches going up 8%. It also accounted for 33% of all searches on Experian’s marketplace.
A balance transfer is when you move your existing credit card balance to a new card with a 0% period – so you stop paying interest on the debt for a set period. If you are not paying the interest on the debt, you’ll clear your credit card debt more quickly as you are only paying back what you owe.
Experian says some cards could offer you up to 33 months interest-free and the average credit card holder could save £672 a year on average by switching their existing balances to a 0% balance transfer card. This is the saving for the average credit card debt of £2,870 with a APR of 27.5%.
Experian says that now may be the “ideal time” to switch to a 0% balance transfer card as eligibility for debt consolidation products increases by 11% at the start of the year. On average consumers that use the Experian marketplace are seeing 0% deals lasting six weeks longer than in December.
Its analysis also revealed that pre-approval rates for those in lower score bands, which includes those with credit scores of poor, very poor and fair, have also increased by 25% on average – meaning that those most impacted by the tightening lending environment now have increased access to credit options.
Before signing up for a balance transfer card, you should be aware that these cards typically carry a fee of 2% to 4% of the amount being transferred. However, some may have zero fees but the length of the 0% interest could be much shorter.
If you choose to do a balance transfer, you should also not spend or withdraw cash on the card. You should also never miss a minimum monthly repayment as you might lose the 0% interest-free period which could cost you more. Finally, you should try and clear as much of the debt as possible in the time you have it.
James Jones, head of consumer affairs at Experian said: “The start of the year is one of the best times for people to search for new debt consolidation options as lenders offer a variety of new deals, such as longer balance transfer or purchase durations. Our data suggests that people are starting the year off on the right foot, exploring ways they can pay off their debt quickly by reducing the amount they spend on interest.
“As people look to plan their next holiday and save for exciting plans in the year ahead, it’s important to think about how any credit can be repaid back, in line with your circumstances and goals.”
“We always encourage people to first check their eligibility for a product before making an application, as searches don’t affect your credit score. And if you are struggling with a debt repayment plan or would like support with an approach then we recommend contacting a free debt advice service such as National Debtline, Citizens Advice or StepChange. Talking to a debt adviser does not affect your credit score and the sooner you seek help the better.”
If you’re experiencing problem debt or are feeling stressed about money, reach out for help and speak to someone about what you’re going through. The sooner you do this, the sooner can get your finances back on track.
You can contact the UK’s largest debt charity StepChange for help. You can use its online debt advice service through its website: Stepchange.org 24 hours a day, 365 days a year, or call 0800 138 1111, Monday to Friday 8am to 8pm and Saturday 8am to 4pm.