Cheap plastic leads us into temptation

Enticed by credit cards trumpeting 0 per cent interest? Then use them to cut your debt, not increase it, says Melanie Bien

Demand from consumers for credit cards charging 0 per cent interest for several months shows no sign of diminishing.

Demand from consumers for credit cards charging 0 per cent interest for several months shows no sign of diminishing.

Sainsbury's Bank last week announced it is continuing its 0 per cent introductory rate, which runs for nine months, owing to customer demand. The supermarket bank had planned to withdraw the offer earlier in the week.

Barclaycard is the latest provider to offer a 0 per cent introductory period on balance transfers and new purchases, which runs until August 2005 - the longest on the market. The company has been inundated with applications following a high-profile ad campaign starring the Hollywood star Jennifer Aniston, and has only recently been able to clear the backlog.

"We had more applications than we thought we'd get," says a spokesman. "But we are now turning them around within two weeks."

While it is encouraging to find people shopping around for a cheap card, not all of them are doing so for virtuous reasons.

Many consumers see a 0 per cent offer as "free" cash that doesn't have to be repaid until a much later date. But if they don't put money aside to clear their credit card bill when the 0 per cent period comes to an end, they could find themselves in worse debt than before.

"I don't doubt that some people, who are quite extended already in terms of debt, will switch to a 0 per cent card and think they only have to cover the minimum payment," warns Stuart Glendinning, director of credit cards at moneysupermarket.com, a website that allows consumers to compare the cost of financial products. "They won't worry about the interest and will run up further debt."

Clever consumers use 0 per cent introductory offers to reduce their debts. Say a customer owes £1,000 on a credit card and has been paying £50 a month towards it; a large chunk of this would have gone towards paying the interest. But if the debt is transferred to Barclaycard and the customer continues to pay £50 a month, all of this will go towards settling the balance because no interest is incurred.

This will enable the customer to clear the balance more quickly. Even if they haven't managed to do so by the end of the offer period, by switching to another card offering 0 per cent they can continue to chip away at what they owe.

Those customers who clear their credit card balance at the end of each month can still benefit from 0 per cent interest on new purchases. Instead of paying off their balance in full as usual, they can put the equivalent amount into an instant-access savings account paying the highest rate of interest they can find.

At the end of the introductory period, they use these savings to pay off the balance on their credit card, so they don't incur any interest. Having earned interest on their savings, they will actually have made a profit.

However, for every person using their card sensibly there are bound to be others who won't. With debt set to top the £1 trillion mark in the next few days, according to the Bank of England, millions are overstretching themselves. Meanwhile, interest rates are on the way up, causing more problems.

Concern over spiralling debt is forcing the Government to seek changes to the Consumer Credit Act. It is calling for credit card statements to carry a warning that customers making only the minimum monthly payment will end up paying more interest. It also wants card providers to run a credit check on customers before extending their limit.

Consumers can protect themselves by noting when their 0 per cent offer ends and moving to another card offering a similar deal. Otherwise they'll pay the provider's standard annual percentage rate. This is at least 13.9 and 15.9 per cent for Barclaycard and Sainsbury's Bank customers respectively, depending on their credit rating.

News
peopleHowards' Way actress, and former mistress of Jeffrey Archer, was 60
News
Robyn Lawley
people
News
people
Life and Style
lifeDon't get caught up on climaxing
PROMOTED VIDEO
Sport
Usain Bolt confirms he will run in both the heats and the finals of the men's relay at the Commonwealth Games
commonwealth games
Life and Style
Troy Baker and Ashley Johnson voice the show’s heroes
gamingOnce stilted and melodramatic, Hollywood is giving acting in video games a makeover
Voices
voices In defence of the charcoal-furred feline, by Felicity Morse
Arts and Entertainment
Unhappy days: Resistance spy turned Nobel prize winner Samuel Beckett
books
Arts and Entertainment
High-flyer: Chris Pratt in 'Guardians of the Galaxy'
filmThe film is surprisingly witty, but could do with taking itself more seriously, says Geoffrey Macnab
News
people
News
A speech made by the Turkish Deputy Prime Minister urging women not to laugh in public in order to preserve morality has sparked a backlash on social media from women posting defiant selfies of themselves laughing at his remarks.
GALLERYWhy are Turkish women having a chuckle at the government's expense?
News
i100
Life and Style
Phones will be able to monitor your health, from blood pressure to heart rate, and even book a doctor’s appointment for you
techCould our smartphones soon be diagnosing diseases via Health Kit and Google Fit?
News
people
Extras
indybest
Travel
Ryan taming: the Celtic Tiger carrier has been trying to improve its image
travelRyanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?
Life and Style
Slim pickings: Spanx premium denim collection
fashionBillionaire founder of Spanx launches range of jeans that offers 'thigh-trimming construction'
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Team Secretary - (Client Development/Sales Team) - Wimbledon

    £28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

    Senior Investment Accounting Change Manager

    £600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

    BA/PM,EMIR/Dodd-Frank,London,£450-650P/D

    £450 - £650 per day + competitive: Orgtel: My client, a leading bank, is curre...

    Senior Analyst - ALM Data - Banking - Halifax

    £350 - £400 per day + competitive: Orgtel: Senior Analyst, ALM Data, Halifax, ...

    Day In a Page

    Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

    The day America’s love of backyard tigers led to a horrific bloodbath

    With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
    Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

    How Samuel Beckett became a French Resistance spy

    As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
    We will remember them: relatives still honour those who fought in the Great War

    We will remember them

    Relatives still honour those who fought in the Great War
    Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

    Kodak's last-ditch bid to keep celluloid alive

    Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
    Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

    Acting in video games gets a makeover

    David Crookes meets two of the genre's most popular voices
    Could our smartphones soon be diagnosing diseases via Health Kit and Google Fit?

    Could smartphones soon be diagnosing diseases?

    Health Kit and Google Fit have been described as "the beginning of a health revolution"
    Ryanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?

    Can we learn to love Ryanair again?

    Four recent travellers give their verdicts on the carrier's improved customer service
    Billionaire founder of Spanx launches range of jeans that offers

    Spanx launches range of jeans

    The jeans come in two styles, multiple cuts and three washes and will go on sale in the UK in October
    10 best over-ear headphones

    Aural pleasure: 10 best over-ear headphones

    Listen to your favourite tracks with this selection, offering everything from lambskin earmuffs to stainless steel
    Commonwealth Games 2014: David Millar ready to serve up gold for his beloved Scotland in the end

    Commonwealth Games

    David Millar ready to serve up gold for his beloved Scotland in the end
    UCI Mountain Bike World Cup 2014: Downhill all the way to the top for the Atherton siblings

    UCI Mountain Bike World Cup

    Downhill all the way to the top for the Atherton siblings
    Save the tiger: The animals bred for bones on China’s tiger farms

    The animals bred for bones on China’s tiger farms

    The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
    A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

    A former custard factory, a Midlands bog and a Leeds cemetery

    Introducing the top 50 hidden spots in Britain
    Ebola epidemic: Plagued by fear

    Ebola epidemic: Plagued by fear

    How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
    Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

    From 'Parks and Recreation' to 'Guardians of the Galaxy'

    He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star