Responding to a report that claimed that more than 4.5 million Britons will be moving their credit card debts to new cards in the first three months of this year, financial solutions company Think Money said that borrowers who are struggling to manage their debts should speak to a debt adviser and discuss their options for clearing those debts as soon as they can.
The company added that there are a number of debt solutions available for people in various situations with debt, including debt consolidation loans for simplifying finances, debt management plans for less serious debt problems, and IVAs (Individual Voluntary Arrangements) or bankruptcy for unmanageable debts.
Banking group Santander found that 4.5 million people are planning to move more than £3.2 billion to new credit cards with introductory offers in the first quarter of the year.
Many credit cards currently offer ‘0% balance transfer’ deals, in which interest will not be charged on the balance for a set period of time (usually a few months). This can allow the borrower to repay their debt without accruing interest, meaning they’ll pay less overall.
However, there is usually a small fee for the balance transfer itself, and deals which do not include this are becoming increasingly rare.
Emma Roberts, Director at Santander Cards, said: "The number of people transferring balances has risen year on year, whilst the amount being transferred has fallen dramatically; this is a clear sign that consumers are becoming savvier when it comes to managing their finances."
But a debt expert at Think Money said that although balance transfers can be an effective way of managing debt in the short term, borrowers who use balance transfers simply to delay making payments must consider how they are going to repay their debt in the future.
"Balance transfers can stop a debt from growing, so in that sense it can be a useful short-term measure for managing debt. But if the borrower doesn’t start paying off their debt, all they are effectively doing is deferring it – and this can be a risky way of doing things in the long run.
"It’s important that anyone with credit card debts has a good idea as to how they will repay it. The longer the debt exists, the longer the borrower is exposed to potential debt problems if anything goes wrong. And there is always the possibility that they may be turned down for a new card at some point, in which case they will start accumulating interest on their existing card.
"There are a number of debt solutions that can help with problem credit card debts. Which one is right for the individual borrower will depend on their circumstances.
"Even if their debts are so big that the borrower can’t see any way of repaying them in full, a debt solution such as an IVA (Individual Voluntary Arrangement) or bankruptcy could help. However, there are a number of alternative debt solutions to help people in various situations, and we advise anyone having difficulties with their debts to speak with a debt adviser about the most appropriate solution for their circumstances."
Notes to Editors
One of the UK’s leading financial solutions providers, Think Money is based in Salford Quays, Manchester, and employs around 700 employees to deliver a comprehensive range of debt, loan, insurance and banking solutions.
Think Money defines its mission as ‘To educate, rehabilitate and advise on all aspects of financial management’.
For more information, contact Melanie.Taylor@thinkmoney.com (0845 056 6480) or visit the Think Money website at http://www.thinkmoney.com/.