Brits are racking up billions of pounds in credit card interest every year, despite the proliferation of 0% cards on the market.
According to figures from the British Bankers’ Association (BBA), total UK credit card debt stood at £55.6 billion in May. Of this, 73% (£40.6 billion) was earning interest.
With the average APR on plastic now an eye-watering 17.5%, this means that Brits accrue roughly £7.1 billion in interest every year.
A complete and utter waste
With food, energy and mortgage costs all putting the squeeze on household budgets, this represents a catastrophic waste of valuable funds.
There are currently no fewer than half a dozen balance transfer credit cards on the market that won’t charge you a penny’s interest for at least a year.
The Virgin credit card is still the best option, offering 15 months interest free with a 2.98% fee.
Alternately, there’s the Capital One Platinum Mastercard or Barclaycard’s OnePulse card (with balance transfer), both of which will get you 14 months interest free, and the list goes on.
Significant savings for minimal effort
Spending money you don’t have is never a good idea, but often it’s unavoidable.
If you do find yourself in such a situation, it’s essential you devise a plan to pay off that debt as cheaply as possible, and that’s where balance transfer cards come in.
Assuming you have £3,000 credit card debt that you want to repay over a year, switch to any of the aforementioned cards and you’ll save at least £200 in that time. That’s a decent saving considering how little effort it takes.
Brits waking up to 0% cards
The good news is that Brits are making more use of 0% credit cards these days, but the change is happening far too slowly.
According to the BBA, just over three quarters (75.1%) of credit card debt was earning interest last April, but this had dipped to 73% one year on. Granted, this isn’t a massive shift in the greater scheme of things, but it still means that Brits were able to keep hold of an additional £200 million that would normally have gone to their bank.
Hopefully more households will wake up to the fact that interest is avoidable and switch their debt to a 0% card. Certainly the penalty for doing nothing is getting greater all the time: Debt charity Credit Action says the average interest rate on credit cards has increased nearly 2% in the last two years.
