Switching credit cards is something that many people do in order to save money on the amount of interest that they have to pay. By choosing interest free balance transfer and purchase credit cards some people have saved a huge amount of money. However, at some point these interest free periods come to an end, which leaves cardholders facing interest of an average 18.2 percent if they have not cleared their balance by the time the interest free period ends.

With this in mind, many savvy consumers make sure that they switch to another interest free deal well before their current one runs out so that they can continue to afford interest free payments on their credit card debts. According to Sainsbury’s Finance there are millions of people who are planning to switch their credit cards over the next twelve months as a result of their interest free periods coming to an end, and with competition in the market still stiff many should be able to find a good deal.

In the current financial climate a huge number of people are keen to cut back on their outgoings and reduce their spending as much as possible. Avoiding interest on credit card debt provides a very effective way of doing this, which is why people are prepared to put in the time and effort to do so.

An official from Sainsbury’s Finance said: “In total 7.9 million people told us they plan to take out a new credit card between October and September 2012, and 32% of these said it is because of their interest free periods ending on their existing cards. This is still clearly the main reason for taking out a new card, and for those that want to spread their costs, it can be a sensible financial planning option. Our Sainsbury’s Credit Card offers a very attractive interest free period on both balance transfers and purchases.”

However, things have become increasingly difficult for households of late, with soaring living costs and bills combined with frozen wages really taking their toll on household finances. Whilst many cardholders have the best of intentions when it comes to repayment their credit card debt, and have been trying to pay down this debt as much as possible, the difficult financial situation has made it impossible for many to keep this up.

According to the FICO Benchmark Reporting Service cardholders in the UK are now paying off less of their credit card debt than at any other time during the past two years, with many unable to afford to pay much more than the minimum repayment on their cards. This has been seen particularly with holders of classic credit card accounts that have been opened within the past five years.          The data has also shown that the number of credit card users who are using their cards to make cash withdrawals has increased, as people continue to battle to make ends meet financially.

One official from FICO said: “The combination of flat spending on classic cards with lower payment percentages and higher cash usage indicates increasing strain on consumers’ wallets. While one month is not enough to call a trend, we are monitoring these and other patterns closely to help our clients manage their card portfolios and understand changes in the UK consumer’s financial health.”

This means that there are likely to be many people relying on credit cards to fund their Christmas purchases this year, with some yet to apply for a credit card to use for their purchases. Industry experts are now warning consumers that now could be there last chance if they want to get an affordable credit card in time to do their Christmas shopping, as Christmas is just weeks away.

One finance expert said: “It’s vital that you compare credit cards to find the right one for you rather than just choosing one by the application deadline. However, with potential postal delays and increases in demand we recommend that you apply for your chosen credit card as soon as possible if you want to use it this Christmas.”

He said that it was important to remember that once an application had been made, credit card firms had to check and approve the application, send out credit agreements and documents, receive those back and then send out the credit card following by the PIN, all of which can take time. With the slower postal service over the festive season to take into consideration as well, consumers need to make sure that they time it right in order to ensure that they are able to receive and use their credit card in plenty of time.

For a huge number of people, the soaring cost of living has meant that not only have they been unable to put any money aside for their purchases at Christmas but they are also continuing to struggle to make ends meet financially due to soaring petrol, food, energy and insurance prices amongst other things. On top of these price hikes, wages for many have remained frozen for some time, forcing them to make their wages stretch further than in the past.

Officials have said that compared to other years consumers who use finance to pay for their purchases over the festive season will need to be far more careful. Shoppers are being urged to think carefully about the amount that they spend over Christmas and New Year and being advised to avoid getting carried away with the plastic when they hit the shops in the run up to Christmas.

One industry expert stated: “It can be really tempting to spend, spend, spend on a credit card over Christmas without thinking about the consequences. However, when that credit card statements wings its way through the letterbox in January many people will realize that they have landed themselves in hot water financially by overspending.”

The figures come from the British Bankers Association and have shown that shoppers spent £6.8 billion on their credit cards in September. This was a drop from the £6.9 billion that was spent in August on credit cards. Consumers have also paid off more than they have spent on their credit cards in that period, paying off £7.2 billion of their debt, which is significantly more than they spent on their cards.

There are many reasons why consumers are now thought to be putting more effort into paying off their credit card debt. An uncertain economic climate, financial worries, concerns over the base rate and mortgage repayments rising, and worries over job losses are all thought to be contributing towards the attitude of consumers when it comes to repaying their credit card debts. Many may be trying to pay off as much as they can before the base rate increases, so that they are better able to handle any increases in their mortgage repayments stemming from the base rate increase.

One BBA official said: “Households are limiting their borrowing in the face of unemployment concerns and pressure on household finances amid general economic uncertainty.”

Figures have indicated that a rising number of people are getting wise to the huge rates of interest that they are paying on their store card balance, resulting in a big drop in store card use over the past twelve months. The figures were released by the Finance and Leasing Association and have shown that many forms of consumers spending fell in the twelve months to August this year, but the biggest fall was with store cards.

In the twelve months to August credit card spending fell by 2 percent, second mortgages fell by 10 percent and spreading repayments via credit from retailers fell by 8 percent. Car finance, however, is said to have increased by 1 percent. With many people having to tighten their belts financially many have decided that they cannot afford the high interest rates that store cards are charging, hence the huge drop over the past year.

Whilst there has been a significant drop in store card use, things may start to pick up again over the festive season as cash strapped consumers looking at different forms of finance to fund their Christmas spending. This is the time of year that many retailers push their store cards, which could see the number of cards being take out and used spike over the final quarter of the year.

By getting a credit card whilst still at university, students are able to take the very important step of building up their credit, which is vital for those that want to be able to get access to competitive finance such as car finance, mortgages and loans when they leave university and step out into the big wide world. It also enables them to build a relationship with a bank or financial institution ready for when they start working after university and will require banking and financial services.

However, officials have pointed out that there is also another side to students having a credit card. With a credit card at their disposal many students who are inexperienced with financial management could quickly find themselves getting into an unmanageable level of debt, which they will then struggle to repay. Many students may also find that they struggle to make payments on time, which could negatively impact their credit for the future.

One industry official said: “Credit cards can come in very useful for students and when used and repaid properly they can help students to enjoy a better financial future. However, failure to use and repay these cards properly could lead to students struggling to get affordable finance in the future, which could mean problems when getting anything from another credit card to a car or mortgage.”

Officials have warned that the situation will be even worse for those hoping to go for the most competitive deals, as most people will be going for the same cards and providers in order to try and bag the best deal possible on their credit cards. This includes credit cards that offer generous periods of interest free credit, which many people opt for so that they can spread the cost of Christmas without being charged any interest.

For those that know that they will be using a credit card for their Christmas and New Year purchases it is important to start the search for the right finance right away, particularly if there is any chance of being turned down and having to then look for alternative means of paying for purchases. The higher level of applications at this time year means that credit card companies could be far slower when it comes to completing the application process and sending out cards.

One official said: “Once October hits the need to start your search for a credit card in time for Christmas becomes urgent, as otherwise you could find yourself in a position where you will not receive your card in time even if you are accepted. If there are any particularly good deals on from various providers you will find that they will be swamped with applications from many people who are all in the same position, which means that you may face even longer delays with processing.”

For many people the most suitable credit card will be the interest free purchase credit card, and there are a number of these cards available from a variety of providers although you will generally need to have decent credit in order to get one. With these cards consumers will be able to pay for their Christmas gifts and purchases whilst avoiding having to pay out any interest for the privilege of spreading their repayments

It is worth noting a couple of things when it comes to getting an interest free purchase credit card for Christmas. Firstly, the period of interest free credit can vary widely from one provider to another so you need to make sure that you compare different deals in order to get the most suitable 0 percent period. A second thing to note is that the closer it gets to Christmas the more difficulty you will have in terms of getting your credit card quickly, as many people apply at this time of year and therefore providers have far more applications to get through, which can mean longer processing times. However, for those able to find a suitable interest free credit card in plenty of time there can be some great benefits.

One official stated: “Interest free purchase credit cards are a great way for shoppers to spread the cost of Christmas without paying any interest. However, it is important to repay the debt by or before the interest free expiry date so that you don’t find yourself suddenly being hit with loads of interest.”

It therefore comes as no surprise that so many people with a range of credit card debts are keen to try and pay off their higher interest debts. Whilst many cannot afford to pay off their credit card debt in one go, one option they do have is to transfer the debt off the high interest cards onto 0 percent balance transfer cards, which will enable them to save money on the amount of interest they pay.

With a range of lenders and banks offering 0 percent credit card for those that want to transfer high interest balances, it is essential for those that want to try and save money in this way to do their research and look for the best deals on 0 percent plans. The interest free period can vary from one provider to another as can the transfer fee, so one deal could end up being a lot better than another, hence the importance of researching.

One industry expert said that it was important to avoid companies that charged surcharges on cards in order to further bring down their spending.

He said: “The best way to avoid greedy businesses who try to profit from debit card surcharges is to avoid them and take your business elsewhere.”