Apathetic credit card holders pay too much

January is when the credit card bills for Christmas extravagance turn up but if you cannot pay off the bills now it could be time to apply for a new card with 0% interest to cut the cost of the debt.

Outstanding credit card balances have reached a record £57.6 billion with the latest figures for gross lending on credit cards in November 2004 higher than any other month since cards were introduced.

However, in spite of the fact that credit card borrowing is not cheap, six out of 10 UK credit card holders, nearly 18 million adults, have never taken advantage of a balance transfer offer, according to new ICM research from Intelligent Finance (IF), which has just brought a new card offering 0% interest for a nine months. This applies to balance transfer and new purchases.

Credit card holders with outstanding balances could save at least £585 million this year by switching to cards offering an interest free period for spending and balance transfers, IF says.

However, borrowers should be aware that when the honeymoon comes to an end after nine months the rate reverts to 12.9%, which is lower than average but still not cheap.

Nick Robinson, Managing Director of I, says: 'With credit card balances at record levels, it is surprising that more cardholders are not taking advantage of balance transfer offers, which can provide a welcome interest free period to help reduce their balances. Credit cards can be a great source of short-term funds, but people should look carefully at interest charges. Uncompetitive cards are very expensive even for short-term borrowing.'

IF's research shows that 5.5 million cardholders have outstanding balances and have never transferred them to another card. Some 58% of cardholders say they tend to pay off their card balances in full and are unlikely to have balances to transfer but 39% of cardholders say they either pay off just the minimum, or a proportion of their balance each month.

The average outstanding balance on a credit card is £930 and the average interest rate paid is 15.4%. Transferring to a 0% concessionary rate would save money but cardholders are apathetic. Nine out of 10 cardholders say they do not check the interest charges on their credit card statements. Only 8% said they checked their statements to see how much interest they were charged.

An alternative for those with larger, longer term debts is to consolidate them within your mortgage. For borrowers whose mortgage discounts or foxes are about to expire this may be a good option. The charges are much lower than on a credit card and will stay that way. Monthly payments can just be diverted into the mortgage contributions and managed that way at a lower cost. The disadvantage of taking this option though is that if the debt is not reduced early on it can add up to significantly more over the life of the mortgage.

The minimum monthly payment on the IF card is 2% of the outstanding balance or £5, whichever is higher. There is no annual charge and no fees for balance transfers.

Other cards offering 0% on balance transfers include: Lloyds TSB Advance, which has the concessionary rate for 12 months from the date of transfer; Premiership Barclaycard, which has 0% until 1 January 2006. Halifax One Visa, Virgin Credit Card Option 1, Alliance & Leicester Online, Capital One Mastercard and Abbey Balance Transfer are all offering 0% on balance transfers for nine months.

You can apply online for the new IF card at www.if.com or over the phone, Tel: 0800 917 6082