Recent research carried out by an independent financial research company has shown that the average representative APR has risen steadily over the last four years with the average now being around 18.7%. They have also stated that with this is mind, the best credit card applications are ones that have carefully considered how much APR they will be paying, and are aware of the ramifications of this rise.
There have also been warnings of a future rise in interest and that preparation for this rise is the best defence against it. With this in mind, here are a few tips on how to avoid paying too much interest on your credit cards:
Brits pay on average £179 million worth of personal interest every day, but it IS avoidable. Don’t be one of these people; look for the best credit cards.
Choose the best credit cards
If you are making a new card application, look for those with an introductory 0% interest on purchases.
If you are planning on making a high value purchase, shopping around for the best credit cards with low interest is definitely a priority.
If this is your first credit card, it’s common sense to start off the best card you can – use online comparison sites to find the best deals with introductory periods of 0%, a good reward scheme and one without annual fees.
Don’t forget to check how long the interest free period runs for as it can vary between 3 and 9 months.
Remember also, the 0% interest period usually only applies to purchases and not cash advances.
Take advantage of 0% interest balance transfers
If your current credit card has a high balance on it, it is possible to transfer this balance across to a new credit card. By taking advantage of 0% interest deals you could transfer a pervious balance and stop paying interest on this for a set period, giving you a chance to gather some money to pay off the balance.
If you have to pay a fee for a balance transfer, make sure it is proportionately low to the balance you are moving. Generally, a transfer costs 2-3% of the balance being moved.
Of course, don’t forget that although 0% interest deals may seem very attractive, if you do not pay off the entire charge before the end of the period you will then have to begin paying the interest at the credit card providers’ standard rate. Check that the post transfer APR% is reasonable.
Be interest savvy
The best way to avoid paying too much interest on your credit cards is to understand the system and know exactly how much money you will be spending and how much this will cost you in interest.
Understand your credit interest days. It is quite possible to work out exactly the period between a purchase and it appearing on your statement, at which point the interest will be added. If you pay off the purchase during the “free credit” period you will not be charged any interest.
Avoid using your credit card for cash advances as these transactions always attract a higher interest rate than purchases.
If you have by any slim chance still have some credit card cheques lying around – destroy them immediately to avoid being tempted into using them. Due to their high interest rates they were deemed high risk lending and were banned by the UK Government in January 2011.
The easiest way to avoid paying too much interest is to pay off your balance every month!
