Warning about credit card debt as switching could save £700

Almost half of the UK's credit card debt is being charged interest.

Many households have debt that could become a big problem.

New data from Moneyfacts shows that the average credit card interest rate is 36%, a record high. However, some credit cards offer long interest-free periods, which can help borrowers save money.

The average interest-free period for balance transfers is now 605 days, the longest in four years. Interest-free purchase offers also last for an average of 303 days, another four-year high.

There is a big difference in the credit card market.

Rachel Springall, a finance expert, says that competition for new customers is strong, with many interest-free offers available. This is good news when interest rates are high.

Nearly half of the UK's credit card debt is being charged interest. In March, 48% of outstanding debt had interest charges.

If someone has a £2,000 credit card balance with a 36% interest rate, they would pay almost £700 in interest over two years if they repay £115 per month. However, switching to a 0% balance transfer card and repaying £150 per month could pay off the debt in just over a year with no interest.

The cost of moving debt to a new card is also decreasing. The average balance transfer fee is now 2.48%, the lowest in over a year.

Some lenders, including Barclaycard and Virgin Money, are offering deals with no balance transfer fees.

Many borrowers do not understand how long it takes to pay off debt when only making the minimum payments.

The average interest-free period for balance transfers is now 605 days.

Springall says that credit card holders who only pay the minimum each month will have debt for longer than they think.

There are concerns about household finances, especially for younger borrowers who are more likely to experience financial problems.

A debt charity found that 71% of its clients have credit card debt and 53% have personal loan debt.

The average interest rate for a £7,500 loan is 8.1%, and rates for most loans are lower than they were a year ago.

However, interest rates for smaller loans have increased slightly.

The interest rate for a £5,000 loan over three years has risen to 10.5%.

Springall advises people to shop around for loans and not just rely on advertised rates.

She also says that people who are struggling with debt should seek advice to avoid their debts getting out of control.

COPYRIGHT DISCLAIMERS

4English does not own the rights to this content. All rights belong to the owner. 4English only uses this content to help users learn English via the app's features. Contact to request the removal of your content: contact@4englishapp.com.

Practice Listening

Practice Listening