MARTIN Lewis has issued an urgent warning to credit card holders over high fees which can be avoided and have “huge benefits”.
The money expert said rather than pay “hideous” interest rates people should look to transfer the debt to a zero-interest credit card.
ITVMartin Lewis has issued an urgent warning on how to avoid fees[/caption]
He explained that this means that instead of potentially paying 20 per cent of the money going in for interest servicing, every penny would go towards reducing the debt.
He said on his BBC podcast: “I always say if you can’t afford to pay off your debts in full each month and you’re paying interest on them you can’t afford not to check if you can get a zero per cent balance transfer.
“A balance transfer very simply is when you get a new card and it pays off the debt on your old card for you.
“So literally you say ‘I want a balance transfer’ and that new credit card will get the details of your existing credit cards and store cards for you and it will pay them. And that way you owe the new credit card the money but interest-free for a set period.”
Lewis advised people to make sure they also check if there’s a fee to move the debt – but clearly even this – which is often around three per cent of the total – is a lot less than 20 per cent interest rates.
He said: “Sometimes there’s a one-off balance transfer fee involved with that.
“And that’s all a balance transfer is. You’re literally shifting debt from your existing credit cards to a new credit card.
But your existing credit cards will be somewhere about 20 per cent interest and the new credit card will be interest-free.
“So if you can clear it within the time there’s either just a small cost to pay – that one-off fee – or if you get a no-fee card then there’s no cost at all to your debt.
“And the huge benefit of that is almost all of your repayments clear the actual debt that you owe rather than service the interest.
“Absolutely everyone who is paying interest on credit card debt should check whether they could get a balance transfer.”
He also revealed good deals currently on offer.
He said: “The top deals out there at the moment: You’ve got up to 29 months zero per cent with a 3.45 per cent fee – that’s the longest and if you need a long time to pay off just go long.
“If you can pay quickly that’s the Barclaycard, there’s also M&S bank and Santander also have long deals up.
“Natwest is the longest no-fee card, that’s down to 13 months zero per cent – it was well over 20 months about a year ago so as the interest rates have gone up these deals have got worse.”
He added: “Big warning with poor credit score credit cards though. With normal cards once the zero per cent ends it jumps to 18 per cent – you don’t want that to happen.
“With the poor credit scorers cards, once the zero per cent ends it’ll jump to around 34 per cent which is hideous.
“So with those cards especially only move debt on to them that you know you can afford to clear within that six or nine months.”
PAHe said people should look to transfer debt to a zero-interest credit card[/caption]