Five things you NEED to know about credit cards as Brits take on £900m in extra debt
FAMILIES struggling to make their cash stretch might be tempted to turn to credit cards - but here's five things you need to know before using one.
Banks reported an increase in demand for credit cards in the last three months of 2021, according to research from the Bank of England.
Brits took on a total £1.23billion worth of debt in November, with families adding an extra £900million to their credit card debt.
This came during the run-up to Christmas as people were starting to feel the heat on the ongoing cost of living crisis.
Prices on household essentials, food, fuel, travel and energy bills are all on the up.
And the cut to the £20 Universal Credit uplift in October last year means low income families are being hit the hardest.
The spiralling cost of living means 3.2million households could be facing financial crisis, Citizens Advice has warned.
It means millions could be in the red or unable to cover essentials - and might look to take out credit to get by.
It comes as nearly half (48%) of Brits use a credit card to meet day-to-day costs after a life event made them worse off, recent research from Turn2Us shows.
But taking on debt should always be a last resort, and not a go-to way to manage your finances.
"There are lots of interest-free credit cards available that you might be eligible for - the lower your interest, the more of your repayments will go towards paying off your actual debt, rather than just paying the interest," she said.
"Also look at different forms of debt - it might be that getting an interest-free overdraft is a better option or a low-interest personal loan.”
It could impact your credit score
Before you take out a credit card, you need to know if you can afford to take one on.
If you don't keep up with repayments or default on your debt, you could get a black mark on your credit record.
That means you could struggle getting a credit card, loan or mortgage in the future.
Think seriously about whether you can keep up with repayments before taking on any debt - or you might not be able to get a loan or credit card in the future when you really need it.
Look into 0% credit cards
You might want to look into getting a 0% balance transfer card.
These cards allow you to move over debts you already owe onto a new card - you also don't have to pay interest on this amount for a set period.
However, be aware that once your 0% interest period is up, you will have to pay interest on how much you have on your card.
Lenders usually charge you between 15% and 20% - but one way of avoiding this charge is to transfer your balance onto another 0% deal.
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We've looked at some other top tips for using your credit card correctly - and it could save you thousands.
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