Christmas is over for another year and if you’re concerned about the amount you spent 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.
1. Use a 0% balance transfer card
First off, if you’ve spent more on credit cards or store cards than you feel comfortable with and are paying interest, shift your balance over to a 0% balance transfer credit card.
Doing so will help you to avoid paying interest on your balance for up to two and half years – giving you plenty of breathing space and time to tackle your debt head-on.
The Sainsbury’s Balance Transfer card, for example, offers 0% on balance transfers for 30 months. After this, you’ll pay 19.95% pa (variable), so try to clear your balance before then.
Bear in mind there is a transfer fee of 3% (minimum £3) for transfers made at application. After this, the fee will depend on your current offer.
The card has a representative rate of 19.9% APR (variable)*, although the rate you are offered will depend on your individual circumstances.
If you are confident you don’t need as long as this to clear your balance, it could be cheaper to opt for a card that offers a shorter interest-free window but no transfer fee.
The Santander Everyday credit card, for example, offers 27 months at 0% on balance transfers from account opening, and there’s no transfer fee to worry about.
After the 0% deal is up, you’ll pay 18.9% pa (variable) and a transfer fee of 3%. The card has a representative rate of 18.9% APR (variable).**
If you’re feeling a bit confused about which card is right for you, our handy balance transfer calculator weighs up your total card balance against the monthly payment you can afford to make to help find the best card to suit you.
2. Consider a low rate credit card
If your credit card balance is high and you know 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 balance, so there’s no deadline by which you need to have paid it off 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 what you owe more quickly.
Bank of Scotland, Halifax and Lloyds, for example, all offer a low rate credit card with a representative rate of 6.4% APR (variable)***. 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 worried, use our Eligibility Checker which will tell you how successful your application will be, without leaving a mark on your credit report.
3. 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 card balance 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.
4. 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 can be a good idea to switch to a current account that won’t charge you.
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 can also get £125 cashback when you switch, 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, having an average monthly balance of £1,000, 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 pay off your overdraft as after the fee-free period is up, as you’ll be charged for each day you’re in your 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 19.95% p.a. (variable) your representative rate will be 19.9% APR (variable).
**Representative Example: If you spend £1,200 at a purchase interest rate of 18.9% 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).
**** Representative Example: Assumed arranged overdraft of £1,200: 0% EAR variable on first £250 then 15.9% EAR variable.
***** Representative Example: If you use an arranged overdraft of £1,200 the amount you’ll be charged is 50p per day (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.
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