Most people will happily use a credit card to spread the expense of goods and services, but the vast majority have no idea what this is actually costing them and, as a result, they could be wasting thousands of pounds.

Four out of five UK adults dramatically miscalculate how much interest they would pay on a straightforward debt, according to lender Ocean Finance.

When it asked 2,000 cardholders, more than 600 of them in Scotland, how long it would take to clear a £3,000 balance charged at the industry average rate of 18.9 per cent a year and repaid at £50 a month, just one in five knew it would be almost 12 years - and that it would cost around £7,000, including £4,000 interest.

Almost half admitted they were clueless, while most of the others put the interest bill at closer to £400 than £4,000.

Ocean spokesman Ian Williams said: "It is concerning that so many people don't really understand the true cost of using their credit card. While most do aim to clear the balance in full, paying just the minimum each month, or slightly more, can see you paying off your balance for many years."

If you can't afford to clear your balance every month, keep the expense down by choosing a card with an extended interest-free period. Several providers, including Halifax, Clydesdale and Santander, charge nothing for 20 months or more, as long as you always make the minimum payment by the due date.

If you already have debt accumulating interest, you can slash the cost by moving it to a zero per cent balance transfer card

.

HSBC, Tesco Bank and Sainsbury's Bank all have cards charging no interest on transfers for 34 months, while Bank of Scotland, Halifax, Lloyds and MBNA offer 35 months, and Virgin and Barclaycard have 36-month options.

Someone switching a £3,000 debt from a card charging 18.9 per cent and clearing it within the free period could save around £800.

Halifax spokesman Jon Roberts said: "By transferring their existing balances to one of these cards, customers can spring clean their finances by restructuring their borrowing in a more cost-effective way."

However, only those with the best credit histories will be offered the advertised terms. Others may be rejected or given a less attractive deal.

To get an extended free period, all applicants can expect to pay a fee of around 3 per cent of the total transferred - equivalent to £90 on a £3,000 debt.

Cards charging less are available but the free period is shorter. Halifax has one with a 1.5 per cent fee but it starts charging 18.9 per cent annual interest after 28 months, while the same provider's fee-free card applies this rate after 16 months.

You will have a limited time to make a transfer, and are unlikely to be eligible if you already have a card from that provider or even a member of the same banking group, because of the interest this would lose them. To be certain, check the small print before committing yourself.

It takes discipline to get the best out of a balance transfer card. As with the zero interest purchase variety, anyone failing to make the minimum payment by the due date - even once - is likely to have the interest-free offer withdrawn and be charged the card's full standard rate on the entire balance until it is cleared.

Ensure this doesn't happen by setting up a direct debit for at least the monthly minimum. To clear the debt within the free period and so avoid paying over the odds, it is vital to make additional payments, though.

Someone with a balance of £5,000 paying only the minimum on a card charging 18.9 per cent would take over 30 years to clear it, wasting about £7,000 on interest in the process.

If you don't manage to repay the full amount before the free period ends, the only way to avoid interest is to switch to another transfer card.

Don't use a transfer card to pay for purchases without checking the terms for these - any free period is likely to be far shorter. For example, Barclaycard's 36-month transfer card allows only six months free on new debt.

If you are paying for a bank overdraft, you might want to use MBNA's Platinum card to clear it. This charges no interest on cash transfers into a current account for 24 months. Even with a 1.94 per cent fee, this could produce a considerable saving.

The same provider's Fluid 29-month card offers five months longer for free current account transfers, but the fee is 4 per cent.

If you don't trust yourself not to add new spending to a transfer card and to clear it within the free period, another option is to repay your debt with a low-cost personal loan. This should ensure you clear what you owe over a fixed period without the temptation to spend more.

Some of the best deals currently come from peer-to-peer (P2P) lenders, websites where ordinary people with money to spare provide cash to others at a modest rate. The best known include Zopa and RateSetter. However, both of these charge borrowers an initial fee.

P2P provider Lending Works, which doesn't levy an application fee, charges 5 per cent a year to borrow £3,000 over 36 months. For larger amounts, rates start at under 4 per cent from a range of conventional and P2P lenders.