Switching credit cards reaches a new high

It is estimated that out of the millions of people who ran up debts on their credit cards in the lead up to Christmas, approximately 2.6million will apply for new cards and attempt to transfer their debts early in the new year, whilst 6.6million will stick with their existing provider despite often paying much higher interest rates (the average being 16.82%).

It is those in the 25-34 age bracket who are most likely to transfer credit card balances early on in the new year, with 13% of them indicating a plan to move debts in the month of January.

It would be worthwhile for those who will not be clearing their balances in January to have a look at the latest credit card deals on offer- as it really could save them quite a bit in interest payments if they swapped  to a card offering 0%. Some providers – such as Virgin Money and Egg are offering 0% deals for up to 15months.

That said, consumers should always read the small print since there usually is a balance transfer fee and this could be as much as 3%. At this level t would mean transferring £2,000 could cost you £60. On the other hand, this is still often less than keeping your debts where they are and overall paying a higher interest rate until all debts are paid.

Money Expert.com have discovered some lenders charging as much as 39.9%which would result in an interest payment of £798 over a year for an initial debt of £2,000.

Sean Gardner, Chief Executive of Money Expert.com says “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.”

Furthermore he adds, “It is good to hear that people are taking action but worrying that millions will simply add their Christmas debt to their existing debt. People should be taking action to get their debt under control and the first step towards that is to cut borrowing costs.”

Of course we should never lose sight of the fact that the goal is ultimately to actually pay off the debt in full, however transferring a balance is a step in the right direction.