Most people in Britain have some form of debt, be it from mortgages or credit cards. The unfortunate thing related to this, however, is that banks consistently profit from consumer apathy. One of the most common ways that they do this is through credit cards. Most credit cards have bonus offers on them, but after this runs out the level of interest is most often charged at around 15% AER. If you don’t pay off your card in full every month, then the bank gains money through charging at this rate. A lot of people don’t pay off their card, even though they could, and then accrue more and more debt on the card until they’re not able to pay it off in full. When this happens, the bank is constantly making money until the credit balance returns to zero. This might take months or even years to do on a card with a balance of £3000.

There are a couple of ways to avoid getting into a situation of paying for your credit card debt in the first place. One way is to use a 0% on purchases credit card. HSBC offers one that offers 0% for 12 months. However, you must be confident that after this bonus period you can pay the card off in full, otherwise you will start paying for any outstanding debt on the card.

Another way to avoid paying on your credit card is to use your current account to pay it off in full every month. This won’t work, however, if you are into an overdraft facility that you pay for, because this will charge you around the same rate, or higher. If you can’t pay off in full without going into your overdraft, then perhaps you should consider getting a current account that has a free overdraft facility. Alliance and Leicester’s top ranking current accounts offer a 0% overdraft facility of up to £2500 for twelve months. What’s more, they also offer 8.5% AER if you’re in credit, which is much better than most savings accounts.

If you have acquired credit card debt then there are also a number of ways to stop paying for it. The first is to get a 0% on balance transfer credit card if you don’t have too much outstanding debt. One of these will enable you to switch outstanding credit card debt to a new card your outstanding debt will be at 0% for a limited time. Currently the longest bonus period for a 0% balance transfer card is from Virgin Money, which lasts for 15 months.

Alternatively, if you have a large amount of outstanding credit card debt across a number of cards, then you should probably consider a personal loan. Alliance and Leicester currently supply cheap loans at some of the lowest rates on the market, and you can borrow £7,500-£20,000 without owning a house. While rates for loans fluctuate, they are almost certainly going to remain under the rates for credit cards, so you can take out a loan, use this cash to pay off a 15% APR credit card, and then pay off the loan at a lower rate of between 6-10%.

This entry was posted on Tuesday, July 1st, 2008 at 8:56 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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