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Everyone with a credit card is warned to avoid one big mistake | Personal Finance | Finance

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Credit card users are being urged to pay down any outstanding debt and avoid racking up new interest charges as borrowing costs hit a record high.

Those who cannot pay off their debt should consider switching it to a card that charges zero interest on balance transfers for an introductory period, to give them breathing space while paying down what they owe.

They may need to work harder to find one, though, as the number of zero-interest credit card deals shrinks as the market gets tougher.

The average APR for new purchases, including card fees, hit 35.3 per cent in the three months to June, according to Moneyfacts.

Excluding fees, APRs averaged 25.86 per cent, also a record, as issuers hiked interest rates or withdrew cards altogether.

Borrowers have fewer options than a year ago, with the number of cards charging zero interest on purchases and balance transfers both falling Moneyfacts finance expert Rachel Springall urged borrowers to tackle outstanding credit card debt promptly in this tougher environment.

“Some borrowers may have turned to credit cards or overdrafts to survive the cost-of-living crisis but these should only ever be used temporarily to cover essential or unexpected expenses.”

Switching to a balance transfer card can offer respite, although fees have now crept up to an average of 2.42 per cent.

HSBC’s balance transfer card offers 27 months of interest-free credit but charges 3.49 per cent of the initial balance transferred.

Springall added that borrowers using these cards must aim to clear their debt before the introductory period ends.

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