Cutting the cost of credit

Despite the base rate dropping to a historic low of 0.5 per cent, credit card rates remain stubbornly high at 18 per cent on average, so it pays to find ways of cutting their cost

How do I pay nothing?

Look for a card offering an introductory 0 per cent rate to new customers. Firms will probably charge a switching fee for transfers, so it isn’t free money but with some cards offering 0 per cent on transfers for a year or more (Virgin and Santander at the moment) these can be useful for people with large card debts who need time to pay them off.

Zero per cent purchase offers can also give breathing space for new spending and enable borrowers to pay down higher-cost debt on other cards.

But what if I don’t want to transfer debts from other cards?

Look for cards with ongoing rates of less than 10 per cent. and have listings of low-rate card deals. Consolidating debts on to your mortgage or a personal loan could also give worthwhile savings.

Any other tips?

Borrowers with high-cost cards should always pay more than the minimum monthly requirement. Even increasing a monthly payment to just five per cent of the outstanding balance can save huge amounts on interest and reduce the time taken to pay the debt off by many years.

Follow us on Twitter @HomesProperty and Facebook