Consumers are building up large amounts of credit card debt and the average balance neared a record high last year, according to a new report.
Figures published by PricewaterhouseCoopers indicate that credit card spending rose by £4.2 billion in 2014, accounting for more than a fifth of unsecured borrowing.
The report also said that the average credit card balance stood at £1,021, which is just £39 below its all-time high.
It put the rise down to greater confidence in the economy, but also warned that consumers needed to be careful to manage debts built up on credit cards.
The cost of borrowing on credit cards has also risen over the past three years. Which? research shows the average representative APR has increased from 18.6% to 20.4%.
So it makes sense to take advantage of one of the many deals that offer you 0% interest for a set period of time.
Here, we suggest how to find the best credit card for you and manage any credit card debt without letting spending spiral out of control.
Find out more: How to find the best credit card – apply for the card that best suits you
Make the most of 0% purchases credit cards
It’s possible to buy large-ticket items or make a series of everyday purchases using a credit card without paying any interest.
There are currently hundreds of credit cards on the market that offer introductory 0% interest deals on all purchases. The longest deal currently available lasts for 23 months.
However, the APR typically skyrockets once this promotional period ends, so you need to be disciplined enough to steadily repay the debt, over the 0% period.
We’d suggest setting up a monthly direct debit transferring money from another bank account onto your credit card to pay off the debt.
Remember all credit cards require you to make the minimum monthly repayment. If you miss a repayment you may lose any promotional 0% deals and the card could revert to its headline interest rate.
Which? Money Compare table – 0% purchases credit cards – hundreds of deals compared
Avoid interest using 0% balance transfer cards
If you’re already paying interest on credit card debt, it’s possible to give yourself a break from interest payments by transferring to a 0% balance transfer credit card.
Some 0% balance transfer credit cards will give you up to 36 months to repay the debt without paying interest. However, these will typically be the more expensive deals with balance transfer fees of up to 3.49% of the balance transferred.
If the length of deal is less important, finding a compromise between the length of deal and a lower balance transfer fee can help you save further on your credit card debt.
A few providers such as Tesco Bank and Santander currently offer deals which charge no transfer fees to transfer a balance to its 0% deal for 12 and 23 months respectively.
Once again, it’s important to either pay off the debt before this promotional period finishes or transfer it to another 0% deal, as the APR will return to the card’s headline rate or in some cases to a higher interest rate.
Which? Money Compare table – 0% balance transfer credit cards – hundreds of deals compared
- How to find the best credit card – apply for the card that best suits you
- How to deal with debt – our tips to keep you in control
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