Did you rack up credit card debt over the festive season? The sooner you tackle it, the quicker you’ll be back in the black. Which? shares our top tips of taking control of your finances in 2019.
Three in five Brits with debt wait two-and-a-half years before confronting their problem, while almost half would wait more than three years before reaching out for professional advice, according to a survey carried out by Creditfix, a personal insolvency practice.
But ignoring a debt will only make the problem grow. With a new year set to begin, Which? explains how to clear your credit card debt in 2019.
Find out where you stand
It can be tough to face up to the reality of your situation, but you should start by working out exactly where you stand.
Gather all of your credit and store card statements together, check how much you owe on each one and what the monthly repayments are.
It’s also worth checking your credit reports to see if the way you have been handling credit this year has had an adverse effect on your credit score. A lower score may disqualify you from deals that can help you manage your debt.
- Find out more: how to check your credit score for free
Focus on the most expensive debts
The credit card with the highest interest rate should be the first one you choose to tackle, as it will be the one costing you the most money.
Credit cards that are still within the 0% period don’t need your immediate attention but take note of when your deal ends so that you aren’t caught out.
Don’t forget to consider other forms of debt, such as overdrafts, which may be costing you even more than your credit card.
It may help to draw up a plan of when each card needs to be paid off and the due dates for each one.
- Find out more: 10 tips to clear your debts
Switch to a cheaper credit card deal
If you’re paying interest on credit or store card, you may be able to move the debts to a 0% balance transfer credit card.
This type of deal allows you to shift over expensive debts from one or more cards and freeze the interest for a number of months. All the repayments you make in this time go towards reducing your debt.
The longest deals allow you to freeze your debt for up to 32 months. But keep in mind that you’ll have to pay interest if you haven’t cleared the balance by then, and you should avoid spending anything new on the card.
You’ll generally also have to pay a one-off fee for each balance transfer you do.
You can compare the best deals using Which? Money Compare but below we have picked out the longest-lasting 0% balance-transfer deals.
|Credit card||0% balance transfer period||Balance transfer fee||Cost of transferring £2,000||Representative APR|
|Post Office Money Balance Transfer Credit Card||32 months||2%||£40||19.9%|
|Santander All in One Credit Card||30 months||nil||£0||21.7%|
|Tesco Bank Money Transfer Credit Card||30 months||2.69%||£53.80||18.9%|
|Virgin Money 29-Month Balance Transfer Credit Card||29 months||1.75%||£35||20.9%|
- Find out more: 0% balance transfer credit cards explained
Tackle big debts with a personal loan
If you have a large amount of credit card debt, you might not be able to get a 0% balance transfer card with a big enough balance to absorb it.
Instead, you might be better off going for a cheap personal loan, which requires you to pay a fixed amount each month over a set period.
The lowest rates available on personal loans are for sums between £7,500 and £15,000 over three to five years. Right now the best personal loan rate is as low as 2.8%.
With a personal loan, you won’t be able to borrow more as soon as you make repayments. This makes it a good option if you’re worried about how disciplined you will be with another credit card.
- Find out more: where to find the cheapest personal loans
Pay more than the minimum
The minimum repayment is the least you can repay on your credit card to avoid a penalty.
However, if you only make the minimum payment, it will take you longer to pay off and cost you more in interest.
For example, say you have a credit card with a balance of £3,000 and an interest rate of 18.9%.
If you just make the minimum 1% repayment (or £5 if higher), it would take you 27 years to pay off and cost £4,170 in interest. On the other hand, making a fixed repayment of £100 a month would take three years and four months and cost a comparatively low £968 in interest.
Don’t keep spending on your cards
If you’re serious about clearing your credit card debts, you’ll need to be disciplined and stop spending on them.
Credit cards – unlike other forms of borrowing – offer ‘revolving credit’, which means when you pay off a bit, your limit is restored to spend again.
Try to avoid temptation by leaving your credit cards at home.
Look at your budget
The next step is to look at all your incomings and outgoings and start to make some changes to help you pay off what you owe.
You might be able to switch your energy deal to make savings and give your budget a boost. Alternatively, you might be able to spot some areas you could cut back on spending, like groceries and going out.
You might also benefit from looking at ways you can make some extra cash to help boost your bank balance.
- Find out more: how to plan an effective budget
Get free debt help
If you’re struggling to get in control of your credit card or other debts, you should seek help.
- Find out more: where to get free debt advice
Please note that the information in the table(s) above is for information purposes only and does not constitute advice. Please refer to the particular terms and conditions of the account provider before committing to any financial products.
Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.