Put Your Debts On Ice

If you're fed up with paying interest on your debts, then why not freeze the interest on them until November 2008? Here's how.

Whether you love them or loathe them, credit cards are certainly here to say. Since Barclaycard launched the UK's first credit card on 29 June 1966, the number of credit cards has soared as Britain moved from being a society of savers to a nation of borrowers. Today, there are around 75 million credit and store cards in issue in the UK.

Of course, used sensibly, credit cards are a convenient tool to assist with budgeting and spending -- indeed, I hope to make £200 to £300 a year from my cashback credit card. However, millions of overburdened borrowers tend to view credit-card limits as targets, which can lead to unpleasant results.

With a typical credit card charging annual interest of around 16.5% APR on purchases and a whopping 23.2% APR on cash withdrawals (as I warned on Tuesday in Why Cash And Credit Cards Don't Mix), it's all too easy to start racking up expensive debts on plastic. What's more, at 16.5% APR, a debt will double in value every 4½ years thanks to compound interest mounting up.

One simple way to stop the clock on interest charges is to shift your existing credit- and store-card debts to a credit card which charges no interest on transferred balances for an introductory period. These cracking cards are known as 0% balance transfer credit cards. However, there is usually a cost for putting your debts on ice, as almost all cards charge upfront balance-transfer fees in order to offset the cost of providing you with a lengthy interest-free period.

So, if you play your cards right and switch your debts to a Best Buy 0% card, for how long could you freeze your interest bill? Here's the answer, courtesy of Fool.co.uk's independent, unbiased credit-card search engine:

Best Buy credit cards for 0% balance transfers

(Note that MINT, NatWest, RBS and Tesco are all operated by the Royal Bank of Scotland group, so you won't be able to transfer debts between the eleven RBS cards listed above.)

So, as you can see, by switching to a Best Buy 0% credit card, you could take a break from interest lasting a year or more. For instance, by transferring a balance of £3,000 to the table-topping Virgin Money MasterCard, you could enjoy a holiday from interest for fifteen months. Over this period, you could save as much as £600 in interest, so it's well worth paying the fee of £89.40 in order to save around £510.

Indeed, anyone with a half-decent credit history who is presently paying interest on their credit-card balances is missing a terrific trick, so switch and save today!

> Check out the other brilliant bargains in The Fool's credit card centre
> The Five Top Credit Cards For Big Purchases