Money Saving Expert Martin Lewis is here with his guide to January debt busting.
If your debt is feeling worse than a New Year hangover, don't just ignore it and hope it goes away - sort those problems out now!
Shift existing debts to save
If you’ve got expensive debts, consider doing a balance transfer. This is when you get a new card that pays off the debts on old cards for you, so you now owe the new card money instead.
The top deals
All the top balance transfer cards require a decent credit score, sadly. The key is to decide how quickly you can repay the card.
Martin’s full Best Balance Transfers guide has a full list and a rundown of cards.
- If you can repay quickly, focus on lower fee 0% deals like NatWest / RBS’s 13 month 0% Platinum card for a one-off 1% fee (17.9% APR after), or Nationwide’s 20 months 0% for a 1.55% fee (15.9% APR after).
- If you need more time, the longest 0% deal is two years for Barclaycard with a one-off 3.2% fee, or MBNA’s with a 2.85% fee.
- If you’re uncertain how quickly you can repay, then forget 0%. Instead, MBNA’s Rate for Life card allows you to lock in debt at 5.9% until all the debt shifted is repaid, for a 1.5% fee.
Quick credit card balance transfer tips
- Getting these cards requires a decent credit score. Don't apply otherwise – though occasionally, there are deals for those with poorer credit scores.
- Repay at least the set monthly minimum, or you can lose 0% deals, be fined and get a credit black mark. The best way to pay is by direct debit for at least the monthly minimum, then manually overpay on top.
- Always plan to fully repay 0% cards or shift the debt again before the 0% ends, or rates rocket.
- Don't spend on these cards. That isn't usually at the same cheap rate – and could cost you a fortune.
- Beware just paying the minimum - credit card repayments are set as a % of what you owe, so they only just cover interest, leaving debt hardly touched. £3,000 at 18% could take 27 years to clear, costing £4,000.
- Once your debts are as cheap as possible, if you've multiple debts then focus all spare cash on repaying the highest-APR one first. Just pay the minimum on all the others. This way, you clear the fastest-growing debt first. Once clear, shift to the next-highest APR and so on.
- Ask your existing card providers if they will allow you to shift debts from other cards to them cheaply. Often they will – which enables you to cut costs without new credit.
- If your credit card firm tries to increase your standard APR rate, you have a right to reject this, provided you agree not to borrow more.
What to do in debt crisis
If you can't meet minimum payments, have non-mortgage debts bigger than a year's salary, or sleepless nights worrying, you're likely to be in debt crisis.
In that case, get free, one-on-one debt counselling help from Citizens Advice, Stepchange, National Debtline, or, if you're struggling emotionally too, CAP. And don't worry, they're there to help, not judge you. The most common comment I hear after is: "I finally got a good night's sleep."