New Year means new credit card for 2.6 million customers

Up to 2.6 million credit card customers plan to start the New Year by transferring credit card debts run up at Christmas , new research from MoneyExpert.com shows.

But another 6.6 million who put some of the cost of the festive season on their plastic are planning to stay put even though they could be paying interest rates of an average 16.82 per cent on their Christmas purchases, the independent financial comparison website’s research shows.

MoneyExpert.com is warning customers that a clampdown in the wake of the ongoing credit crunch could mean successfully applying for a new card may be difficult - and might be deterring people from switching.

And it is urging customers to keep an eye on balance transfer fees which can be as high as three per cent. Someone transferring £2,000 of debt would pay £60 for the privilege.

It found around seven per cent of credit card customers will be transferring debts this month as people try to clear up their finances for the New Year. Average zero per cent offers on balance transfers run for 10 months, according to MoneyExpert.com.

However 18 per cent of customers – around 6.59 million people - who ran up debts at Christmas will stay put on existing deals of rates up to 39.9 per cent in the most severe cases. On a £2,000 debt they’ll pay £798 interest over the year.

Sean Gardner, Chief Executive of MoneyExpert.com, said: “Credit card companies can expect a busy transfer season in January as millions of us wake up to the cost of Christmas before the New Year financial hangover sets in.

“It is good to hear that people are taking action but worrying that millions will simply add their Christmas debt to their existing debt. Piling debt on debt is simply adding to the spiral of increasing financial trouble.

“People should be taking action to get their debt under control and the first step towards that is to cut borrowing costs. The next important step is then of course to pay the debt off but transferring a balance is at least a start.”

Credit card customers aged between 25 and 34 are the most likely to be starting the year with a credit card transfer – around 13 per cent of them plan to move debts in January.

Scots are the most likely people across the country to be changing with 15 per cent shuffling cards compared to six per cent in London and seven per cent in the rest of the south of England.

There are plenty of credit card deals which could help people cut debts – as long as they can successfully apply for them following the credit crunch hitting application acceptances.

The average zero per cent introductory offer on balance transfers now lasts 10 months, the independent financial comparison website says.

Analysis of the market shows currently 72.5 per cent of all standard credit cards now offer zero per cent balance transfer deals. That amounts to 169 cards compared with 149 at the start of the year.

Currently the longest zero per cent balance transfer offer is 15 months from Egg and Virgin Money.