Hello and welcome to Money Matters, I’m Clare Francis.
If your Christmas excesses are coming back to haunt you and you’re worried about how you’ll pay off your credit and store card bills, don’t panic. Here we’ve got five tips on how to clear your debts and hopefully reduce your need to borrow next Christmas.
Check what rate of interest you’re being charged
If you own money on credit and store cards, take a look at your statements to see what rate of interest you are being charged. You should look to clear the most expensive debts first, but the good news is you might be able to avoid paying interest all together…
Shift the debt onto a 0% balance transfer card
There are some great credit card deals available at the moment offering interest free periods on balance transfers. Barclaycard’s Platinum Card with Extended Balance Transfer has a 30-month interest free period, for example.
However, if you move a debt over onto one of these cards, you will be charged a transfer fee and these can vary. The cards with the longest 0% periods tend to charge between 2.8 and 3%. But some have lower fees. For example, with another of Barclaycard’s offerings, the Platinum Balance Transfer Offer card, you’ll pay 1.5% to shift a debt from another card but you still benefit from a 25-month interest-free period. And Halifax’s All-in-One card, which has a 15-month 0% period, has a transfer fee of just 0.8%.
So if you don’t need 30 months to pay off your debts, go for a card with a shorter 0% period and lower fee. You should always aim to clear your balance during the interest free period though.
Consider a personal loan
If you don’t have the discipline to clear your debt within the 0% period, or owe more than you think you can repay using credit cards, consider taking a loan out instead – you’ll still be able to significantly reduce the amount of interest you’re being charged.
There are a number of products with rates below 5% - in fact, personal loan rates have never been better!
The advantage of a loan over a credit card is that you know your debt will be cleared within a set period of time. With a credit card, it requires you to be disciplined in order to ensure it’s paid off. So it’s something worth considering.
Leading deals are only available to those with excellent credit scores
As you’ll probably know, lenders run credit searches when a person applies for any form of borrowing to assess the ‘riskiness’ of that individual. The leading credit cards and loans are only available to those with the best credit histories.
If yours is less than perfect, you won’t qualify for the longest balance transfer deals, but don’t give up. There are cards aimed at people with lower credit scores and some of them offer interest-free periods.
MoneySuperMarket’s Eligibility Checker tool will help you identify the credit cards or loans you’ll be eligible for. Include annotated links to the credit card Eligibility Checker tool and Loans Eligibility Checker.
Start saving for next Christmas
If worrying about how you’ll pay for the cost of Christmas is a perennial issue for you, then get ahead and start putting a bit of money away each month so that when you don’t need to put as much on credit cards next Christmas. You may even manage to save enough to avoid having to borrow at all.