Avoid interest for 22 months!

Why pay interest on credit and store cards when you don't have to? Learn how right now...

Do you have any credit cards? If so, do you always repay your balances in full?

If you don't pay in full every month, then you'll pay sky-high rates of interest on these interest-bearing balances.

This rate rip-off costs us billions

Since March 2009, the Bank of England's base rate has been stuck at an all-time low of 0.5%.

With British banks able to borrow at incredibly low rates, mortgage interest rates have plunged to record lows. However, while UK homeowners have seen their monthly mortgage repayments dive, the same can't be said for the UK's 31 million users of credit cards.

Almost two-thirds of adults (64%) have a credit card and, with nearly 56 million credit cards in issue, many of us have two or more. In 2010, we spent £136 billion on credit and charge cards, which equals an astonishing £4,313 spent on plastic every second.

Now for the bad news: credit cards are getting much more expensive.

In fact, the interest rates charged by card issuers have been rising steadily, despite the base rate falling to nearly zero. This 'great rate rip-off' means that cardholders are paying upwards of £2 billion more in interest than they were two years ago. Ouch!

A simple solution to sky-high rates

Today, if you have any outstanding balances on credit cards, then you're most likely paying around 19% a year in interest on this debt. With rates this high, your debt doubles every four years, thanks to interest alone.

What's the answer to this rate rip-off?

Obviously, if you have savings, then you could use this cash to pay down your credit-card debt. This will produce big returns, because your savings are probably earning less than 3% a year before tax, but your plastic is costing at least six times that.

Another answer would be to bump up your monthly repayments, increasing your direct debit or standing order so as to pay off your debts faster.

The third option -- my favourite -- is to 'freeze' the interest on plastic debts by using 0% balance transfers. In return for paying an upfront fee of around 3% of each transfer, 0% balance transfers enable you to avoid interest for an extended period. In some cases, top 0% deals last for nearly two years.

Of course, you need to balance the transfer fee against the length of the 0% deal. The lower the fee charged, and the longer the 0% period, the better. Here's a selection of the best balance transfers on offer today:

Britain's best balance transfers 

Compare credit cards at lovemoney.com

As you can see, these are terrific 0% transfers. Each of these five deals offers 20 to 22 months of interest-free credit on transferred debts from credit and store cards. The transfer fees range from 2.9% to 3.5%, which is a small price to pay for nearly two years of interest-free borrowing.

Until the end of October, the Lloyds TSB Platinum Credit Card offers 0% balance transfers for 15 months for a fee of just 1.5%. This fee, which works out at just 0.1% per month, makes it the balance transfer that beats the rest.

Transfer bans

Of course, as with all financial products, watch out for the catches and snags. These include:

1. You cannot transfer card balances to any cards issued by the same group. So, transfers are forbidden between Halifax and Bank of Scotland, RBS and NatWest, and so on.
2. Never use 0% transfer cards for spending. Otherwise, you'll pay interest on these purchases at the full rate.
3. Always set up a direct debit or standing order, in order to guarantee that you meet each monthly repayment. Otherwise, your 0% deal could be withdrawn, plus you could pay penalty charges.
4. Before applying, always read the small print, as some card issuers impose minimum salary levels on applicants of, say, £20,000 a year.

Now what are you waiting for? Go play the transfer market today!

More: Find the best balance transfers | Get £20 Amazon voucher with top 0% card | 20 month 0% deal with £100 cashback