Selling endowment policies may be more ideal than switching debt

The number of Britons who are transferring credit card debt to a card which offers an introductory offer of zero per cent interest has risen, a new report has revealed.

Findings from Santander Cards showed that in the first three months of 2010, £2 billion will be moved to new credit cards in an attempt to stop interest climbing on their balances.

Chris Radford, chief executive officer of aap - the UK's biggest buyer of endowment policies - said some of its customers had decided to sell their underachieving endowments in order to clear their credit card debt, rather than simply switching between products.

Switching to new deals to try and tackle debtIt was recently reported by aap that some lenders are clearing their customer's smallest credit card debts first, leaving the biggest amounts to accrue interest.

As such, Britons who are struggling to stay on top of a number of credit card repayments could find a larger proportion of their income is spent on meeting these financial commitments.

Switching to a zero per cent interest card could be seen as an ideal short-term technique for keeping interest down. However, these only last for a short while and consumers will eventually have to start paying higher interest levels again.

The Santander Cards study found that five per cent of people over the age off 55 intend to switch their credit card debt to a different product, with the majority of individuals deploying this technique below this age.

More than 4.5 million Britons will use this technique in the first three months of this year.

Emma Roberts, director at Santander Cards, said: "The number of people transferring balances has risen year on year, whilst the amount being transferred has fallen dramatically; this is a clear sign that consumers are becoming savvier when it comes to managing their finances."

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Selling endowments could avoid damage to credit references

Britons have been advised to check their credit references for any mistakes that could hinder their ability to secure personal loans and credit cards in the future.

The ICO said marks against a person's name could mean that when the time comes for them to need to secure credit, they are unable to do so.

Chris Radford, chief executive of aap - the UK's biggest buyer of endowment policies - said some of its customers had decided to sell their underperforming endowment policies to cover the cost of a large expenditure, rather than apply for a personal loan or credit card.

Credit references could be damaged by relying on credit

The ICO said making sure a credit file is correct is important because during the economic downturn, "millions" of Britons will turn to credit cards and personal loans to keep them afloat.

Requests for credit could be turned down by lenders if they believe a customer poses a high risk and is more likely to default on repayments.

However, rather than relying on credit to cover the cost of expenses, it could be wise for Britons to raise the money another way to stop household coffers falling into the red.

"Many of us will be relying on credit to get us through 2010. Out of date or wrong information in your credit file might not only stop you getting the credit you need but could have further damaging or embarrassing consequences," explained David Smith, deputy commissioner at the ICO.

Applying for more credit could prove damaging, however, if households already have to make a number of personal loan and credit card repayments.

Endowment policy cash could be an alternative to credit

Mr Radford, from aap, said rather than rely on credit, some of its customers had decided to sell their unwanted endowment policies to raise money required.

He added that should aap make an offer to purchase an endowment policy, it will always pay more than the surrender value offered by the insurance company.

Reasons to sell your endowment policy


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