A massive 20% drop in income and 10 million people on leave during the COVID-19 pandemic has seen many Britons turn to credit to get by.
However, with interest-free overdrafts and payment holidays coming to an end, recovering from the financial effects of the coronavirus crisis “may be more costly than many realize,” a financial expert has warned.
Research by TotallyMoney has found that Britons could unwittingly lose hundreds of pounds by “using certain financial products to their advantage”.
More than half (53%) of Britons have unpaid credit card debt but no 0% promotional offer, meaning they could pay 20.77% interest, according to a survey of of 193,000 TotallyMoney customers.
On the basis of this rate of 20.77% and the average credit card balance of £ 2,595Britons could save around £ 445 in interest by transferring the credit card balance to a 23-month 0% balance transfer card, the study found.
Additionally, consumers could pay £ 5.23 in withdrawal fees and interest on a £ 82 average credit card cash withdrawal, with 44% of survey respondents not knowing, this will be classified as a “cash advance transaction”.
Credit card fees “skyrocket” when a card is used for a cash advance transaction, which not only incurs withdrawal fees, but also begins to accrue interest “at the time the transaction is processed. completed, ”TotallyMoney said.
On top of that, thousands of people across the UK could soon be paying interest of up to 40% on their overdraft, as interest-free overdrafts of £ 500 offered to 27million at the start of the COVID pandemic -19 are coming to an end. , warned the experts.
“For millions of people in the UK right now, finance is a real struggle. The uncertainty of the coronavirus is still present and many people may have purchased additional credit products or taken payment holidays to help manage expenses, ”said Alastair Douglas, CEO of TotallyMoney.
“However, credit can be confusing, and it’s no surprise that consumers don’t know what qualifies as a cash transaction, what their interest rate is, or even how often they are using their overdraft.
“With greater transparency on these types of loans, consumers can avoid paying unnecessary additional fees. “