Finance experts TotallyMoney have warned that consumers could be unwittingly losing hundreds of pounds by using certain financial products against their advantage. Research reveals:
A massive 20% drop in income and 10 million people on the furlough scheme during coronavirus has seen many turn to credit to get by.│
However, TotallyMoney has warned that with interest-free overdrafts and payment holidays coming to an end, recovering from the financial effects of coronavirus may be costlier than many realise.
True cost of borrowing exposed
The finance experts have said that increased awareness of more expensive types of borrowing could allow customers to find cheaper alternatives, which can help prevent them from spending more than they need to.
For example, some of the 27 million people offered an interest-free overdraft when the coronavirus pandemic started could soon face higher interest rates than before it began, with many reaching highs of 40%.
Furthermore, despite credit cards often being a cheaper alternative, many don’t realise the majority will accrue an average of £445 in interest due to not having a interest-free promotional offer.
Credit card fees further soar when a card is used for a cash advance transaction, which not only incurs a withdrawal fee, but also starts accumulating interest the moment the transaction is complete.
Shining a light on borrowing blind spots
TotallyMoney has launched a free and exclusive app-first feature to give customers an overview of how they use credit, including flagging types of borrowing that could be expensive, such as frequently using an overdraft, using a credit card for cash advance transactions, and carrying a balance on a card with no promotional rate.
Credit Assistant summarises why these could be expensive ways to borrow, so consumers can better understand how to use their credit and get more money in their pocket.
Alastair Douglas, CEO of TotallyMoney, comments:
“For millions of people in the UK right now, finance is a real struggle. The uncertainty of coronavirus is still present and many people may have taken out extra credit products, or taken payment holidays, to help manage spending.
“However, credit can be confusing, and it’s not surprising that consumers don’t know what classifies as a cash transaction, what their interest rate is, or even how often they use their overdraft. With greater transparency about these types of borrowing, consumers can avoid unnecessarily paying out extra.
“Looking at debt and borrowing habits can be daunting, though. With Credit Assistant, we’ve enabled customers to see their credit and how they’ve used it over time in a clear and meaningful way.
“At TotallyMoney, we’re on a mission to improve the UK’s credit score. Credit Assistant can help people look at all their borrowing behaviour, understand how they can make better decisions, and move on up to a better financial future.”
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