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Christmas comes, people overspend and have a January debt hangover. Avoid the worry and cut costs NOW to prevent debts spiralling out of control.
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Debit cards can be worse than credit cards. Using debit cards feels better than credit, but for the overdrawn, there's little difference. If that's you, beware, budget and compare interest rates and use the cheapest. This is especially important if close to your limit & therefore hideous bank charges. |
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| 2. |
Always set up a direct debit to avoid credit damage. Use a direct debit as a safety net to pay at least the minimum. This way you'll never be late, avoiding fines, charges and black marks. Then, as you should always repay as much as is affordable, call up to pay more each month. |
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| 3. |
 Shift existing debts to 22mths 0%. Accepted new customers can transfer balances to Barclaycard* at 22mths 0% for a one-off 2.9% fee. To shift from a Barclaycard, Halifax* is 22mths but with a bigger 3.5% fee (under £3k only) and Virgin* is 20mths with a 2.99% fee.
If you can repay quicker, another Barclaycard* is 16mths 0% with just a 1.6% fee.
Always try to fully clear before the 0% ends or the rates jump to 17.5%, 17.9%, 18.9% & 18.9% representative APR, respectively. Full 'which card is cheapest calc?' in Best Balance Transfers. |
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| 4. |
Haggle with your plastic provider. Even if you can't get new credit, don't give up. Many credit cards have hidden deals which, if you've room in your credit limit, let you shift debts to them cheaply. Eg, Barclaycard is 6.9% for life, Halifax may offer 9 mths 0%, both with 3% fees. Help to minimise rates without new credit in Existing Customer Balance Transfers. |
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| 5. |
Pay off debts with savings. A £1,000 debt on an 18% credit card costs £180/yr. The same in savings at 2% after tax earns £20/yr. Use savings to repay debt and you're £160/yr up. If you're thinking "it's my emergency fund," in most cases, still pay it off. Why? Read Repay Debts Or Save? Similar logic often applies to mortgages, see Pay Mortgage With Savings? |
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| 6. |
0% for 6mths for POOR credit scorers. This Capital One* Classic card gives 6mths 0% spending to some with defaults or CCJs. Use very carefully either to rebuild your Credit Rating by spending a little each month and pay in full. Or, as respite from bank charges or payday loans while budgeting to clear within 6mths, or it's a huge 34.9% representative APR.
This card can be dangerous, don't use it as an excuse to borrow more. Step-by-step help in Poor-credit Credit Cards. Also check if you're eligible for emergency 0% loans from the job centre. See Social Fund Loans.
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| 7. |
Don't repay equally. If you've multiple cards, don't just repay the same off all. Focus repayments on the highest interest rate to clear the most excessive quickest. Only repay the minimum on the rest. Once it's gone, focus on the next highest. Yet if you've just one card, beware paying just the min, eg, £3,000 at 18% could take 27 years to clear. For tricks and calcs to beat that, see Danger Minimum Repayments. |
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| 8. |
15mths 0% on NEW spending. Never borrow just to fill the gap in wages, only do it for planned, budgeted expenditure, with affordable repayments. The cheapest way, if you've a decent credit score, is 0% spending credit cards. Tesco* and Marks & Spencer* give 15 mths 0%, but clear them before the 0% ends or the rates jump to 16.9% & 15.9% rep APR. Help & best buys in 0% cards (Official Card APR Examples). |
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| 9. |
Almost repaying in full is expensive. Clear credit cards in full, after spending, and you pay nowt, yet nearly clear and you may pay interest on the whole amount. Eg, repay £1,950 on £2,000 debt at 19.9% and it's £30 interest, the same as paying the minimum. Find the extra if you can. |
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| 10. |
You've a right to reject rate rises. If your card company says it'll up the APR, reject it by agreeing not to borrow more – see Reject Rate Rises. |
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Let me finish with a note to those in severe debt, perhaps not sleeping or panicked about how they'll cope. The most important thing to understand is...
No matter how bad it feels, I've NEVER seen an unsolvable debt crisis case. It mightn't be easy or quick, but there's always a way.
Make an appointment with one of the free non-profit debt counselling agencies Citizens Advice, CCCS, National Debtline, or if you've emotional problems, CAP. Full info in our Problem Debt Help guide & free Mental Health & Debts booklet.
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