Using credit can at times be a great way to balance the books, as long as you're organised when it comes to repayments. Unfortunately, many people aren't, and find themselves caught in a juggling act of unmanageable debt.
According to research from the AA, 11% of respondents are juggling debts and have transferred balances on credit cards, with many continually moving these debts for years and even decades.
Indeed, the average respondent has made three transfers, while 20% of balance transfer credit card users have made more than five in the last year, which could suggest that the balance rarely gets reduced to any extent.
This can be further seen with the finding that people are juggling an average of £2,353 between cards, while 10% of respondents have over £5,000 worth of unsecured debt to their names. Even more worryingly, 47% of those in debt don't know how much interest they're paying, which could set them up for a nasty shock when they realise how little they're actually paying off.
Many appear to be unaware of the terms and conditions of a balance transfer deal, too, with things like missed payments often resulting in the introductory term coming to an end. This may explain the need to keep transferring cards, but it could also result in the debt taking far longer to pay off.
This may not always be by choice, however, with 21% saying that they'd like to pay off their borrowing but aren't in a position to do so, and in fact, it's only in their 50s when people typically reach "money maturity" and have a long-term plan in place to pay off their debts.
Michael Johnson, director of Financial Services at the AA, said that "while low cost loans and balance transfers can be a good way of consolidating debt, many risk paying a price for missed payments.
"People need to be aware of the rules of the game, knowing how long introductory rates last and what might cause them to end early, for example missing a payment. Setting a calendar reminder for when your introductory rate ends can ensure you don't sleep walk into paying higher interest and experience an unwelcome addition to your monthly commitments.
"Playing game of loans can be helpful for a short period, but the key is to be honest with yourself about when it's time to stop. Replacing credit card balances with one personal loan can be a good first step to ending the game and committing to regular repayments."
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