How to clear your Christmas debt

If you feel you got a little carried away over Christmas, fear not, these top tips will help you to get back in to the black…


The New Year has begun, and if you’re reeling from the effects of spending too much over the festive period, don’t panic, you’ve come to the right place.

Our top tips will guide you through getting your finances back on track in no time at all.

Card debt? Shift it to 0% balance transfer card

First off, if you’ve racked up debt on credit cards or store cards and are paying interest on that debt, shift it over to a 0% balance transfer credit card.

Doing so will help you to avoid paying interest on your debt for as long as three years – giving you plenty of breathing space and time to tackle your debt head-on.

The Halifax balance transfer credit card, for example, offers 0% on balance transfers for 40 months, so long as they are carried out within the first 90 days (minimum transfer of £100). This offer ends on February 15.

Just watch out for the transfer fee of 2.95% (again on transfers made within 90 days, otherwise you’ll pay 3%).

Once the 0% period is up, you’ll pay 18.95% pa, so it’s best to clear your balance before then. The card has a representative rate of 18.9% APR (variable)*.

If you are confident you don’t need as long as three years to clear your debt, it could be cheaper to opt for a card that offers a shorter interest-free window but no transfer fee.

The Halifax credit card, for example, offers 23 months at 0% on balance transfers carried out in the first 90 days (minimum balance transfer of £100), and there’s no transfer fee to worry about (although you'll be charged 3% after the first 90 days).

After the 0% period is up, you’ll pay a representative rate of 18.9% APR (variable)*.

If you’re feeling a bit confused about which card is for you, our handy balance transfer calculator weighs up your debt against the monthly payment you can afford to make to find the best card to suit you.

Consider a low rate credit card

If you’ve got a lot of credit card debt and it’s going to take you a long time to clear it, it could be worth choosing a low rate credit card.

With this type of card you pay a low rate of interest for the life of the debt, so there’s no deadline by which you need to have paid off your balance in full.

And although you’ll still pay interest, chances are the rate will be much lower than the rate you are currently paying – helping you to save money and clear your debt more quickly.

Bank of Scotland, Halifax and Lloyds, for example, all offer a low rate credit card charging 6.45% p.a (variable)** on balance transfers. There’s no fee to pay on transfers made in the first 90 days (you’ll pay 3% after that).

Keep in mind you’ll need a good credit score to be accepted for the top cards, so if you’re at all worried, use our Smart Search facility which will tell you how successful your application will be, without leaving a mark on your credit report.

Pay off more than the minimum each month

Minimum monthly repayments on credit cards are often set at very low levels, so paying off more than that each month is a simple way to clear your debt more quickly - providing you can afford to do so.

It’s a good idea to set up a monthly direct debit for the amount you want to pay, so you don’t have to worry about remembering to pay on time.

Missing a payment can not only harm your credit score, if your card has a 0% introductory period, your card provider can choose to withdraw it.

Switch to a better overdraft

If you relied on your overdraft to see you through Christmas and you’re now being charged interest or fees, it’s time to switch to a current account that won’t charge you for dipping into the red.

If you can cope with a relatively small overdraft, First Direct’s 1st Account offers a £250 interest-free overdraft. You’ll be charged 15.9% EAR (variable) on arranged overdrafts above this.

You’ll also be given £150 for switching to the account exclusively through MoneySuperMarket, so long as you use the Current Account Switch Service and pay in at least £1,000 within three months of opening your account.

Paying in at least £1,000 a month or having another product with First Direct, such as a mortgage, also means you’ll avoid the account’s £10 monthly fee.

Alternatively, the Nationwide FlexDirect current account offers a fee-free overdraft for 12 months.

Try to use these 12 months to get rid of your overdraft once and for all as after the fee-free period is up, you’ll be charged 50p per day on arranged overdrafts over £10 (the first £10 of your overdraft is free).

All overdrafts are subject to status and approval.

*Representative Example: If you spend £1,200 at a purchase interest rate of 18.95% p.a. (variable) your representative rate will be 18.9% APR (variable).

**Representative Example: If you spend £1,200 at a purchase interest rate of 6.45% p.a. (variable) your representative rate will be 6.4% APR (variable).

All credit cards are subject to status and terms and conditions. Over 18s, UK residents only. Terms and conditions apply. See for further information.

Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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