Halifax launch new low-rate credit card designed to help clear debt

Posted by Tom Blandford in Personal Finance on 10 January 2017 - Tom is a Credit Analyst at checkmyfile

Halifax have recently announced the launch of Flexicard, a low-rate card targeted at those with high amounts of debt. It allows consumers to set up larger regular payments towards existing balances and easily work out how long they will need to make payments to clear a balance. The interest rate is also relatively low at 6.4% APR.

The cheapest and most efficient way to utilise credit cards will always be to pay it off in full each month, however it is all too easy to allow a balance to pile up, especially after Christmas when spending is usually exceptionally high. Use of balance transfer cards can also be a cheap way to clear debt, as long as it is significantly reduced during the promotional period offered for the card.

Minimum payments, while small, can take years to reduce even a relatively low balance. For example, paying off 3% each month for a £2,000 balance would take 16 years to clear the balance entirely assuming a typical APR. It is even worse to consider that the average UK household has around £7,000 of debt, or £3,765 per UK adult (Excluding mortgages) so it would take even longer to clear the balance in full.

The Money Charity found that the average consumer would take 25 years and 6 months to clear their credit card debt, assuming only minimum payments were made towards the average credit card balance of £2,452. This is because the minimum payment would decrease (from £58 in this instance) towards its lower limit as the balance decreases, whereas setting up repeated monthly payments of the initial minimum payment of £58 would clear the same balance in 5 years and 4 months.

The online instalment plan feature supported by this card allows cardholders to set up regular, larger repayments to reduce their balances. Although this is entirely possible for other credit cards by making payments manually - this feature cuts out unnecessary hassle and streamlines the process, making it more difficult for a balance to spiral out of control and allows you to monitor your progress towards clearing a balance easily online.

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