Debt crisis grips UK - how you can drive down your credit card repayments

Nearly one in two credit card balances in the UK is racking up interest - and at today's recordhigh rates, borrowing is painfully expensive. New data from UK Finance shows that 47.5% of outstanding card balances are currently accruing interest. Despite this, spending on credit cards keeps climbing. In May alone, there were 394.4 million card transactions worth £21.8billion, both higher than a year earlier. Behind those figures lies a clear warning that it's becoming all too easy for shortterm borrowing to turn into longterm, costly debt.

Moneyfacts reports the average purchase rate on cards has now hit 35.7% APR, a joint record high. At that rate, even a small balance can spiral. Someone repaying just £20 a month on a £300 debt would still be clearing it nearly two years later, having forked out £84 in interest. However, increasing repayments, even slightly, can make a substantial difference.

Paying £50 a month instead would clear the same debt in just seven months and reduce the interest to only £30. This shows how small changes can save both time and money. There are also other ways to regain control.

Moving your existing balance to a card offering a 0% balance transfer deal can buy you breathing space, as long as you commit to clearing the balance before the interest-free period ends.

Some providers, such as Barclaycard and Lloyds, are currently offering 0% interest on transfers for up to 21 months.

You'll typically have to pay a small balance transfer fee of around 2% to 3% of the amount you're moving, but the savings made on interest in the long run will make it a price worth paying.

Your credit report plays a role, too. Lenders are far more likely to offer the most competitive rates to people who can show they have reliable repayment habits and whose credit reports are accurate.

Taking the time to check your report and correct any errors can help you secure better terms in the future.

Credit cards do come with perks. If you use one to buy something costing between £100 and £30,000, you're covered by 'section 75' of the Consumer Credit Act.

This means the credit card company has equal responsibility with the seller if there's a problem with the item of service you've bought, which is invaluable when shopping online.

But the bottom line is, with nearly half of balances attracting punishing interest, using a card without a plan can be an expensive habit.

Paying more than the minimum, shopping around for deals, and keeping a close eye on your debts are key to remaining in control of your money.

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If you've built up a decent savings pot, you might assume the interest it earns is yours to keep. But millions of savers could soon find a share owed to the tax office.

According to HMRC data, the number of higherrate taxpayers is set to climb above 7 million in 2026, the most on record. And for these taxpayers, the Personal Savings Allowance - the amount of interest you're allowed to earn tax-free - has been cut in half to £500.

With savings rates still relatively high, it doesn't take much to tip into taxable territory. Especially with fixed-rate accounts, where interest is often paid in a lump sum at maturity and taxed all in one year.

For example, a higher-rate taxpayer with just £5,000 in a three-year fixed-rate account at 4.45% could exceed their PSA when the interest is finally paid out.

Every extra pound over the £500 threshold would be taxed at 40%. This could come as a shock to many, particularly as HMRC has announced its plans to send fewer letters from this year onwards.

Without a notice through the post, and unless you check your tax code online, the first sign may be a smaller net pay packet.

Jeremy Cox, head of strategy at Coventry Building Society, warned that the higher rate of tax is "no longer just for the wealthy - it's becoming the norm for millions of fulltime workers," largely due to frozen thresholds. He describes it as a "stealth tax" that's hitting both earnings and savings.

According to the savings expert, the simplest protection is to make use of cash ISAs. With a £20,000 annual ISA allowance, savers can still earn strong rates completely taxfree, keeping more of their money safe from HMRC's reach, and avoiding any nasty surprises later in the year.