Switch your credit cards to trim debt

SAVING money on your credit-card bill can be as simple as switching to a new card company. It is not just a question of playing the field for the lowest interest rate or the lowest annual fee. Some card issuers will trim your overall level of debt if you transfer your credit card business to them, even if you are still in the interest-free period and not yet paying any interest on that debt.

Switching to Barclaycard could cut your credit card debt by up to pounds 150. It is offering to knock off 5 per cent from debts of up to pounds 3,000 run up on other credit cards. You do not have to be paying interest on these "debts".

Midland Bank also offers a 5 per cent rebate on a balance transferred from a rival credit-card company. But this rebate is only available to people who are already paying interest on at least some of the transferred debt. If you are simply transferring a balance that has not yet attracted interest, there is no rebate. The maximum saving in moving to a Midland Access or Visa card is pounds 100.

The Bank of Scotland runs a similar scheme for new customers who consolidate their credit and storecard debt on to one of its cards. A sliding scale offers a maximum saving of pounds 60, for debt transfers of pounds l,250 or more.

Unusually, the Bank of Scotland offer is better value for those with smaller debts. If you were to transfer a pounds 250 debt, the minimum the bank is interested in, you would save pounds 20, or 8 per cent of the total. The pounds 60 saving on pounds l,250 (or more) works out at less than 5 per cent.

Borrowers looking at these schemes will need to balance the debt reduction against any increase in interest rate or annual charge they might suffer. The longer you keep your debts the more important the interest rate becomes. Barclaycard, for example, charges a relatively high APR of 22.6 per cent and an annual fee of pounds 10.

Some card companies will instead of reducing debts charge their new customers a lower introductory interest rate. Co-operative Bank charges a concessionary rate of 12.6 per cent on debts transferred on to its Visa card. It will pay off your credit cards and other bills. The amount transferred is ring- fenced from any spending you make with the new card, which incurs interest at the Co-op's standard rate, currently 21.7 per cent on its Robert Owen card, and 19.5 per cent on its Visa Gold.

Customers are required to pay off all their cheap debt first. It is not possible to make the minimum 3 per cent payment on the transferred debt while paying off the more expensive new spending in its entirety.

MBNA International, part of the Maryland Bank of North America, has made a big effort to attract customers since it launched here in November 1993. It charges a concessionary interest rate of 13.9 per cent on debt transfers and other spending you make in your first six months after moving to MBNA. It issues new customers with a cheque book that they can use to pay their credit cards, gas and electricity bills and mail-order purchases. The interest charged will revert to the standard rate of 18.9 per cent after six months.

In theory, there seems nothing to stop you combining several of these schemes. So you could repeatedly cut your debts by moving your credit card to Barclaycard in January, then on to the Midland in March, the Bank of Scotland in May - and then pay off the balance at a reduced rate by switching to the Co-op. Alternatively, you could cut a big bill by 5 per cent by transferring it to Barclaycard and then pay it all off before any interest became due. However, this may involve some nifty paperwork. In practice, switching between a number of card issuers is likely be increasingly hard, and the constant movement would also damage your credit rating.

As MBNA illustrates, you will generally be charged lower rates of interest on cards issued by smaller, less well-known banks than by Barclaycard and other long-established issuers. If you expect to be paying a lot of interest, rather than simply reducing a bill quickly, you would probably be better off moving to a firm with a low interest rate, such as Robert Fleming/Save & Prosper, which charges an APR of 14.6 per cent.

There are "money off" deals and loyalty schemes associated with many cards, but these benefits do not in themselves justify the expense of credit cards with higher interest rates.

Full information on credit card rates can be obtained from Moneyfacts, a monthly publication that also operates a daily updated fax service. You can get a complementary copy by calling 01692-500765.

Its premium-rate fax line will give you the latest rates, charged at 39p a minute, or 49p a minute at peak times. If you have access to a fax, dial 0336-400243 and press the start button when prompted.