2.6 million new credit cards taken out in January
Up to 2.6 million credit card customers plan to start the New Year by transferring credit card debts run up at Christmas, research from MoneyExpert.com shows.
But another 6.6 million who put some of the cost of the festive season on their plastic are planning to stay put even though they could be paying interest rates of an average 16.82% on their Christmas purchases, the independent financial comparison website’s research shows.
MoneyExpert.com is warning customers that a clampdown in the wake of the ongoing credit crunch could mean successfully applying for a new card may be difficult – and might be deterring people from switching.
And it is urging customers to keep an eye on balance transfer fees which can be as high as 3%. Someone transferring £2,000 of debt would pay £60 for the privilege.
It found around 7% of credit card customers will be transferring debts this month as people try to clear up their finances for the New Year. Average 0% offers on balance transfers run for 10 months, according to MoneyExpert.com.
However 18% of customers – around 6.59 million people – who ran up debts at Christmas will stay put on existing deals of rates up to 39.9% in the most severe cases. On a £2,000 debt, they’ll pay £798 interest over the year.
Sean Gardner, chief executive of MoneyExpert.com, said: “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.
“It is good to hear that people are taking action but worrying that millions will simply add their Christmas debt to their existing debt. Piling debt on debt is simply adding to the spiral of increasing financial trouble. People should be taking action to get their debt under control and the first step towards that is to cut borrowing costs. The next important step is then of course to pay the debt off but transferring a balance is at least a start.”