Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, said:

“Consumers looking to consolidate their credit card debts would typically turn to a 0% balance transfer offer, particularly when their existing debt is incurring interest at a high rate. Interest-free offers have unfortunately worsened in terms of the time given to borrowers to pay back their debt before interest applies. Those who do use these deals will usually have to pay a balance transfer fee, so it’s wise to keep this in mind if debts are going to be moved around often over the short-term. Some of the longest interest-free balance transfer offers carry higher transfer fees, but there are still some fee-free offers for borrowers to consider instead.

“Borrowers might be comparing ways to pay off any unexpected expenses just before the school holidays end. Parents may be realising they have to replace lost or broken items before the new term starts, and a credit card is a quick way to cover the expense. There may also be spenders out there who have used their free time sprucing up the home, where improvement costs could quickly escalate. However, there might be borrowers who use credit cards in any emergency, perhaps to avoid missing any regular repayments from their bank account after using up their disposable income. An interest-free purchase card is a convenient choice to cover any of these scenarios, but borrowers should always aim to make more than the minimum repayment each month and have a plan in mind to clear the debt before their 0% offer ends.

“Consumers who do not have an interest-free offer on their current deal might be concerned to know the average purchase rate stands at a record high of 35.6% APR. If someone borrowed £1,000 on a credit card that charges 35.6%, but made £100 in fixed repayments, it would cost them around £170 in interest and take a year to repay. However, if they stuck to repaying £50 per month, it would take more than twice as long to repay and cost around £421 in interest*.”

*Based on a £1,000 borrowing on a credit card charging 35.6% APR, with a minimum repayment of 2.5% or £5 whichever the greater. Difference in interest based on fixed repayments of £100 or £50.