A new report from peer-to-peer lender Zopa has highlighted the significant proportion of UK credit card borrowers who could be falling deeper into deb…
A new report from peer-to-peer lender Zopa has highlighted the significant proportion of UK credit card borrowers who could be falling deeper into debt as a result of failing to pay off balance transfers prior to interest-free periods running out.
It revealed the average Brit currently has £9,513 in unsecured credit card debt and the amount typically being transferred to a zero per cent deal in May this year by borrowers stood at £1,855, with 17.3 million UK balance transfers completed during the month.
However, of this figure, one quarter (27 per cent) are unlikely to reap the full benefits of such a move, with their zero per cent interest period likely to be cut short by their lender as a result of a missed or late payment.
Moreover, in cases where individuals do achieve the full zero-per cent period, 49 per cent of borrowers do not pay off their balance in this time – with an average balance of £1,289 in debts left on cards.
This would not be too much of a problem if individuals remembered to switch their borrowings again to a new deal, but in general, Brits leave balances on credit cards that are paying interest for five and a half months before switching it again.
In this way, Zopa's report revealed that one in four cardholders have now been building up their borrowings for five years or more, leading to growing levels of indebtedness for many Brits.
Moreover, many people fail to take into account balance transfer fees when moving their debts to zero per cent deals, with Zopa revealing the accumulated cost to borrowers of balance transfer fees in the last year stood at £810 million.
Individuals faced with large credit card debts should therefore consider seeking the advice of a professional on the best methods for reducing their borrowings.
This could include measures like debt consolidation to merge all borrowings into a single, more manageable monthly outgoing, or alternatively, the use of an individual voluntary arrangement could help those facing serious concerns over the affordability of their borrowings.
Posted by Amy White