Credit Cards Scandal Exposed As Banks Pocket £90m Of Your Money Each Year

Some 2.5m credit card holders are using their credit cards to withdraw cash and in the process are being stung for around £90m a year in interest.

It’s a little known fact that withdrawing cash on your credit card often costs you well over 20 per cent in interest! Worse still, even if you are paying off your borrowing each month, then your cash borrowing will not be paid off until any other debts – balance transfers or purchases – are cleared from the card.

In addition  5 million Brits are using their credit cards to pay household bills. This is just storing up a whole heap of financial trouble because it means borrowers end up paying  a high APR for longer.

Three top tips to STOP THE CREDIT CARD ROT.

1. Do a balance transfer to a 0% credit card

Move your balance to a 0% card. Natwest is offering 0% on balance transfers for 15 months, with a transfer fee of 2.9% of the amount transferred. Virgin Money’s 0% deal lasts for 14 months, and has a slightly higher transfer fee of 2.98%.

Having a £5,000 cash withdrawal balance for a year at 20 per cent would cost you £1,000 in interest. If you have additional borrowing, then that is the least you could save.

2. Get a loan

If you cannot use a balance transfer card to get a 0% rate, or even if you can only move part of the balance, then get a loan. Sainsbury’s Finance has a 7.8% rate for borrowers taking loans of between £7,500 to £14,999 for up to five years. But you have to be a Nectar card holder to get this rate. The scheme is free to join, and you can get money off items, such as shopping at Sainsbury’s, so there may be an upside.

Tesco Bank is offering the same amount for the same period at a marginally higher 7.9%, but there are no extra hoops to go through to get this rate.

3. Consider taking debt advice

Most people don’t realise that they have a debt problem until they are up to their necks in it. If you are having to use your card on a regular basis to pay your household bills, and you are even contemplating withdrawing cash on the card, then consider getting some free help to get your debts in check.

Speak to a debt adviser to find out what you can do to get your finances back on track. There are a number of options, including a debt management plan, an individual voluntary agreement, and even bankruptcy – which is right for you will depend on your position. But that is what the debt adviser is trained to do, so find someone to help you deal with your debts sooner rather than later.