How to get your finances back on track

We look at seven ways to get your finances in order in 2020

Using a credit card

If you feel like you’re finances haven’t recovered from Christmas or even last year’s holiday, it’s not always easy to know how you’ll find the funds to pay them or get your finances back on track.

But don’t panic, there are a number of steps you can take to pay down debt more cheaply and get your finances in order.

1.       Pay less interest on your credit card

Credit card debt – whether it’s left over from Christmas or even last year’s holiday – can take a long time to shift, particularly if you’re paying interest. Moving it over to a 0% balance transfer credit card can help you pay it off far quicker and more cheaply.

With a 0% balance transfer card you can avoid paying interest on your balance for as long as 29 months in the best cases.

Be aware you will usually have to pay a transfer fee, which is a percentage of the balance you move over, but the amount you save in interest payments usually outweighs this cost.

Try to clear your balance before the 0% deal ends and interest kicks in and be aware the best deals are reserved for those with good credit ratings. Using our Eligibility Checker when you search for cards allows you to see the deals you’re more likely to be accepted for – and it won’t hurt your credit score.

Representative example: If you spend £1,200 at a purchase interest rate of 19.95% p.a. (variable) your representative rate will be 19.9% APR (variable).

2.       Pay more than the minimum

Another way to pay less interest on a credit card is to pay off more than the minimum each month. Minimum monthly repayments are typically set at low levels so if you only pay off this amount each month, not only will you pay more interest, it will take you a lot longer to clear your balance.

Let’s say you have a credit card balance of £1,000 on a card charging 19% APR. The minimum monthly repayment is 1% of the balance with a minimum of £25. Paying only this amount each month would cost you £513 in interest and it would take you five years and one month to clear.

Yet if you paid a fixed payment of £150 a month, it would take you eight months to clear and cost just £60 in interest.

MoneySavingExpert’s minimum repayment calculator can help you do your own sums, and it’s worth setting up a direct debit to make sure you remember to pay on time.

3.       Shift store card balances

Store cards typically charge high interest rates, often as high as 29.9% APR. If you used one in the run up to the festive period, the good news is you can transfer your balance across to a 0% balance credit card – just as you would with a standard credit card – and save on interest payments.

Representative example: If you spend £1,200 at a purchase interest rate of 19.95% p.a. (variable) your representative rate will be 19.9% APR (variable).

4.       Pay less for your overdraft

Paying interest on your overdraft? Switch to a current account that won’t charge you.

The Nationwide FlexDirect current account, for example, offers an interest-free overdraft for 12 months. Try to use these 12 months to pay off your overdraft as after this you’ll be charged 39.9% EAR (variable) on arranged overdrafts.*

An alternative is to use a 0% money transfer card. These allow you to move money from your credit card into your current account and then use the funds to pay off your overdraft interest-free. The best deals offer up to 28 months at 0%. Keep in mind you’ll need to pay a transfer fee.

Representative example: If you spend £1,200 at a purchase interest rate of 19.9% p.a. (variable) your representative rate will be 19.9% APR (variable).

5.       Reduce your loan rate

If you are paying a high rate of interest on a personal loan, it can be worth looking into whether you can switch to a better deal to reduce the amount of interest you’re paying.

However, it’s important to consider this carefully and check whether you’ll be charged a penalty for getting out of your existing deal early and whether that’s worth paying.

6.       Be wary of buy now, pay later

Buy now, pay later schemes such as Laybuy and Klarna are increasing in popularity, particularly with younger shoppers. However, using these schemes can affect your credit rating – particularly if you don’t make your payments on time. Missed or late payments can stay on your credit report for six years.

If you are using a buy now, pay later scheme, check the terms and conditions carefully and make sure you pay promptly. Once you’ve paid up, you may want to consider other credit options in the future instead.

To keep an eye on your credit rating, you can sign up to Credit Monitor which allows you to check your score for free and get tips on how to improve it.

7.       Seek professional help – for free

If you are struggling to pay your bills or keep up with repayments on credit agreements, speak to your provider as soon as possible. They may be able to set up a new repayment plan.

There are also a number of free debt charities that can offer you advice and practical steps to get back on track. These include StepChange, National Debtline and Citizens Advice.

According to the Money and Pensions Service, almost two-thirds (64%) of people with outstanding payments have reduced or cleared their debts within three to six months of seeking advice.

Don’t bury your head in the sand – seek advice as soon as possible.  

*Representative Example: If you use an arranged overdraft of £1,200 the interest rate charged is 39.9% EAR (variable).

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

MoneySuperMarket is a credit broker - this means we'll show you products offered by lenders. We never take a fee from customers for this broking service. Instead we are usually paid a commission by the lenders - though the size of that payment doesn't affect how we show products to customers.

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