Overspent this summer? Here’s what to do
If you spent more than you feel comfortable with over the summer, here’s how to get your finances back on track
If your summer holiday is a distant memory and all you’ve got left is a maxed out credit card and empty bank account, we’ll show you how to get your finances back on track.
If you used a credit card to pay for your holiday and other summer expenses, the first step is to check how much interest you’re being charged and whether you can lower it.
If you are paying a high annual percentage rate (APR) on what you owe, it can be a good idea to move it to a 0% balance transfer credit card.
Many of these cards offer lengthy introductory interest-free deals that will give you a bit of breathing space and help you to pay off what you owe more quickly and cheaply. Just be aware you’ll usually have to pay a transfer fee and you will need to have a good credit score to qualify for the best deals.
The MBNA Long 0% Balance Transfer credit card, for example, offers 0% on balance transfers for 29 months, so long as they are carried out in the first 60 days. The card has a balance transfer fee of 2.75% of the amount you transfer each time.
Plus, if you transfer £1,000 or more, you can currently receive £20 cashback. Transfers must be made in the first 60 days of the account opening. The offer applies to accounts opened between 3 September and 4 November, 2019. T&Cs apply and you won’t find this offer on any other comparison site.
Once the 0% deal ends on the MBNA card, you’ll pay 20.93% pa (variable), so try to clear your balance before then. The card has a representative rate of 20.9% APR (variable)*.
Be aware that depending on your individual circumstances, MBNA may offer you 0% interest for 16 months on balance transfers made in the first 60 days and a representative APR of 27.9% APR (variable).
If you’re unable to pay off your balance before the interest-free deal ends, you’ll need to move it to another 0% balance transfer card and pay another fee.
An alternative is to use a low rate credit card that offers a low rate of interest for the life of the debt.
The Lloyds Bank Platinum Low Rate credit card, for example, offers a representative rate of 9.9% APR (variable)**. However, you may be offered a representative rate of 16.9% APR (variable), depending on your circumstances.
There’s also no transfer fee, so long as you carry out any transfers within the first 90 days. After that it rises to 3% (min £3).
If you’ve used your overdraft to fund your holiday spending, check whether you’re being charged interest or fees for the privilege. If you are, see whether you can switch your current account and benefit from an overdraft that won’t charge you.
The Nationwide FlexDirect Account, for example, offers a fee-free arranged overdraft for the first 12 months***.
You’ll need to do your best to pay off your overdraft within those 12 months as once they are up, you’ll be charged 50p per day on arranged overdrafts – this is changing to 39.9% EAR (variable) after 11 November, 2019****.
Alternatively, if you can cope with a relatively small overdraft, the First Direct 1st Account offers a consistent £250 interest-free overdraft*****. You’ll be charged 15.9% EAR (variable) on arranged overdrafts above this.
If you switch to this account you will also receive £50. You must pay in at least £1,000 in the first three months to qualify and be a new customer.
Be aware you'll need to pay in at least £1,000 a month or maintain an average monthly balance of £1,000 or have another product with First Direct, such as a mortgage, to avoid paying a £10 monthly fee on the account after the first six months.
Another way to tackle your overdraft is to use a 0% money transfer card. This type of card allows you to move funds from your credit card into your current account interest-free. You can then use these funds to pay off your overdraft.
Tesco Bank, for example, offers up to 28 months’ interest-free on money transfers made in the first 90 days, although you may be offered 0% for 22 or 16 months, depending on your individual circumstances.
Note that you’ll have to pay a fee of 3.94% on transfers made in the first 90 days, and once the introductory period ends, you’ll pay 21.814% to 30.467% pa (variable) depending on your circumstances, and a 3.99% fee.
The card has a representative rate of 19.9% APR (variable)******.
If you took out a personal loan to help fund your summer adventures, check what rate of interest you’re earning. If it’s particularly high, it might be worth switching to a better deal to reduce the amount of interest you pay. But do consider this carefully before making a decision.
M&S Bank, for example, offers 2.9% APR representative on borrowing of between £7,500 and £20,000, over one to seven years. To qualify you need to have an annual income of at least £10,000, be a UK resident and be aged 18 or over.
Before you switch, be sure to check whether you’ll be charged a penalty for getting out of your existing deal early and whether that’s worth paying in order to benefit from a lower rate of interest.
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.
*Representative Example: If you spend £1,200 at a purchase interest rate of 20.93% pa (variable), your representative rate will be 20.9% APR (variable).
**Representative Example: If you spend £1,200 at a purchase rate of 9.94% pa (variable), your representative APR is 9.9% APR (variable).
*** Representative Example: If you use an arranged overdraft of £1,200 the amount you will be charged is 50p per day (variable).
****Representative Example: If you use an arranged overdraft of £1,200 the interest rate charged will be 39.9% APR (variable).
*****Representative Example: 0% EAR variable on the first £250. 15.9% EAR variable on anything above £250 (assumed overdraft £1,200).
******Representative Example: If you spend £1,200 at a purchase interest rate of 19.9% pa (variable), your representative rate will be 19.9% APR (variable).