Consolidating credit card debt can save 571 a year
People who consolidate existing credit card and overdraft debt using a consolidation loan can save themselves 571 a year.
09:26 20 December 2004
People who consolidate existing credit card and overdraft debt using a consolidation loan can save themselves 571 a year, comparison website moneysupermatket.com has revealed.
Options open to consumers looking to save money in the new year include credit cards offering a zero per cent balance transfer and taking out a personal loan with an interest rate of only 5.8 per cent.
For consumers with debts on credit or store cards, in particular those who often pay no more than the minimum repayment due, an interest-free balance transfer is an attractive way of saving money on interest repayments.
Moneyuspermarket.com points consumers to some of the 30 credit cards offering zero per cent interest on balance transfers, particularly the Halifax One, HSBC Gold Visa, Virgin MasterCard, Mint mc2 MasterCard and the Barclaycard Platinum Visa.
"The key benefit of the zero per cent deal is that all of the monthly repayment goes towards clearing the balance outstanding and therefore the debt can be cleared much quicker. With so many good deals on the market, it's madness not to switch," said Richard Mason, director, moneysupermarket.com.
However Which? is warning consumers to tread carefully with interest free balance transfers, with several cards charging a fee for the service and any money paid in can often be used to pay off the lowest interest debt.
In effect this means any money paid in by consumers will go towards paying off their interest-free debt, leaving any other borrowing untouched and building up interest.
Not all card providers do this and Nationwide, HSBC, Liverpool and Victoria, and Saga all put any money paid in towards paying off the most expensive debt.
Another moneysaving option moneysupermarket.com is urging consumers to consider in the new year is debt consolidation.
"Rather than panic or ignore card and bank statements as they hit the doormat in the new year, consumers should spend a few moments assessing what they are paying out, at what cost and to whom," said moneysupermarket.com's Mr Mason.
"Debt consolidation is one option to help consumers take control and better-manage all of their debts under one umbrella, whilst repaying a lower, fixed rate sum," he added.
For those seeking to take out a personal loan, moneysupermarket.com points to the AA personal loan (5.8 per cent), the Direct Line loan (5.9 per cent), the Alliance & Leicester personal loan (5.9 per cent), the smile loan (6.0 per cent) and the Sainsbury's Bank loan at 6.1 per cent.
More generally consumers looking to improve their finances in 2005 are advised to: research their options before taking out any product, take out the shortest term loan they can afford to pay off, to try and make sure that they always pay off more than the minimum amount on their credit card, and not to spend excessively on existing cards after their balance has been transferred or their debt consolidated.