Missing A Payment On Interest Free Credit Card Can Be Costly
Recent news reports that UK credit card borrowers are paying over £1 billion in charges for missed payments on balance transfer cards. January see’s a large amount of people looking to benefit from an introductory 0% interest free balance transfer credit card as it means that they are able to sort out their finances and pay off debts incurred over Christmas and New Year. Credit card companies know this and offer a range of deals for new custom, including 0% on balance transfers. The average balance transfer is around £3k. This is a great solution when it works, however if the borrower misses one repayment on the balance transfer credit card they can quickly become exempt from the interest free deal and hit by a larger interest rate.
This can of course put extra financial strain on borrowers, research by the Co-op shows that there are 3.3 million credit card holders in the UK, with 40% of them in possession of a balance transfer card. It is reported that 25% of these no longer benefit from the introductory 0% interest offer due to missing a repayment and are now paying a lot more than they originally anticipated.
It seems that either way the credit card companies are on to a winner, as the percentages of those now paying a higher interest rate due to missed payments is over half of those that are in possession of one.
It is crucial, if you are approved for a 0% interest rate on a credit card that you ensure that you repay your credit card payment on time every month. Not doing so defeats the object and can show that maybe you are having more problems with your debts that you would like to admit to. Missing repayments can quickly spiral out of control and cause debt problems, which can be stressful and take a long time to rectify.
If you are not eligible for a 0% interest free credit card, then you may be eligible for a debt consolidation loan instead. Although there will be interest rates applied, these may be lower than the interest rates applied by a credit card company should you make a mistake and miss a repayment. Overall the interest rate that you pay will be dependent on your status rating, the better your credit rating is the lower the rate and vice versa. Before applying for any further credit, it is beneficial to check your credit rating, you can do this easily by logging on to credit reference agency websites such as Experian, or Checkmyfile.com. From here you can take the next step to seeing what finance options are likely to be available to you based on your good, average or bad credit rating.