Consumers wise up to debt by switching credit cards

07 January 2008 / by None
Nearly 2.6 million credit card users are set to see in the New Year by swapping to a new provider in an attempt to reduce their debts, according to the latest research.

Figures from MoneyExpert.com have shown that while many are keen to get a lower rate and take advantage of the promotional offers touted by the credit card firms, a massive 6.6 million plan to stick with their current card provider.

MoneyExpert.com is warning customers that a clampdown in the wake of the ongoing credit crunch could mean successfully applying for a new card could prove difficult, which in turn could put people off. What's more, steep balance transfer fees which can be as high as three per cent are also worth keeping an eye out for as someone transferring £2,000 of debt would pay £60 for the privilege.

The study found around seven per cent of credit card customers will be transferring debts this month as people try to clear up their finances for the New Year with attractive zero per cent offers on balance transfers running for up to ten months, however 18 per cent of customers – around 6.59 million people - will stay put on existing deals of rates up to an extortionate 39.9 per cent in the most severe cases – a hefty £798 interest repayment over the year on a £2,000 debt.

Sean Gardner, Chief Executive of MoneyExpert.com, comments: “Credit card companies can expect a busy transfer season in January as millions of us wake up to the cost of Christmas before the New Year financial hangover sets in.

“It is good to hear that people are taking action but worrying that millions will simply add their Christmas debt to their existing debt. Piling debt on debt is simply adding to the spiral of increasing financial trouble.

“People should be taking action to get their debt under control and the first step towards that is to cut borrowing costs. The next important step is then of course to pay the debt off but transferring a balance is at least a start.”

MoneyExpert.com's analysis of the market has also revealed that 72.5 per cent of all standard credit cards now offer zero per cent balance transfer deals – an increase of 20 extra offers on the 149 cards the start of the year. Egg and Virgin Money are currently offering the longest zero per cent balance transfer offer on the market.

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