0% Credit Cards
There is no doubt that 0% credit cards and balance transfer can be helpful if used smartly. At PCCU we talk to many people in Burnley and Pendle who took out 0% credit cards with the intention of using them correctly and taking what is often considered the cheapest from of credit. However problems occur when balances start to increase and making repayments get more difficult.
With a 0% credit card you make purchases and do not pay interest for set number of months, recently Martin Lewis Money Saving Expert highlighted that 0% interest free periods are reducing rapidly and borrowers need to be aware. 0% balance transfer credit cards are often used to switch credit card debt from one lender to another, if used correctly it gives the borrower time to reduce the balance whilst paying no interest. However the 0% interest period will not last forever and to use the transfer effectively people need to concentrate of clearing the balance, not increasing, before the period finishes.
Only paying the minimum payment once the 0% period finishes
Credit card companies offer the low or 0% periods because they judge that a number of borrowers will not clear or reduce their balances before the introduction period finishes. We have found that over the years problems start to occur when the 0% period finishes and borrowers are unable to switch to another 0% credit card. When credit card users only pay the minimum monthly payment it really starts to get expensive and difficult to get out of
£2,655 Average household credit card debt in the UK
19.87% APR Average interest rate on credit cards in the UK
26 years and 9 months How long it will take to clear the average balance when making the minimum monthly payment on a credit card
The Money Charity calculated that the minimum repayment in the first month would be £67 on £2,655. If £67 were paid every month, the debt would still take 5 years and 3 months to clear with no extra spending.
We turned to Which? the largest independent consumer body in the UK to find out what interest rates the different credit card providers charge
Representative interest rates means that only 51% of applicants have to be accepted for the advertised rate, meaning a large number can end up being charged a higher rate of interest on balances. At PCCU on loans over £3000 all borrowers who successfully apply for a loan are charged 12.7% APR.
Credit cards have been used in the UK for over 50 years however the last 20 years have seen a large increase in their use, with some balances spiraling out of control. PCCU have been available in the Burnley and Pendle communities to help to relieve the financial stress caused when 0% credit card deals end and repayments feel like they are going nowhere.
Speak to one of our highly trained members of staff today if you think we may be able to help your situation.
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