The unfantastic plastic

By MICHAEL CLARKE
Updated:

 

ONE in ten credit card holders are using the wrong card for their needs, racking up hundreds of pounds of interest in the process.

Just over three million consumers are wasting £120m in interest a year by failing to match the right cards with their spending pattern.

For example, nearly half of card holders say they use their cards to make regular purchases, yet only 11% chose a card because it offered a low rate of interest.

In addition, 10% of consumers are making purchases on a card on which they have transferred a balance to take advantage of a 0% interest offer. However, most card issuers will clear the cheapest debt first, meaning repayments will go towards paying off the balance transfer, while purchases will accrue interest.

Rob Kenley, head of credit cards at the company behind the research, moneysupermarket.com, said: 'Credit cards offer an easy and appealing payment solution, but not being savvy about how to use them can cost consumers a lot of money.

'It is important to work out why you need to use a credit card and, in turn, seek out the appropriate one to match your needs.'

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One of the most common reasons why consumers end up with an unsuitable card is that they accept offers from their existing bank. A third will accept their bank's offer, while 10% respond to a direct mail advert.

Three quarters of eligible Brits have at least one credit card, although the average is 1.8 per person. Kenley added: 'Don't be taken in by the headline rates on offer because the cheapest deals do not automatically signal that the card is right for you.

'As always, when it comes to financial products a bit of planning and research will help you minimise the risks of paying more than you need to.'

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