Rid yourself of your Christmas credit card debt

12th January 2013  

With the Christmas and New Year festivities finally behind us and most of us already facing the reality of commuting to work in the depths of dull and grey January, are you one of the disciplined few that kept within their Christmas budget, or are you dreading the arrival of your credit card bill this week?

At what’s become the most financially demanding time of the year with the obligatory Christmas presents, prolific eating and drinking, followed by retail temptations in the New Year sales, how have your finances held up? Did you stick to your budget or did you let your credit card take the strain?

Most financial commentators feel that the worst of the credit crunch is now behind us, and with that we’ve gradually seen the re-emergence of some really ground breaking balance transfer credit card deals. With a bit of careful comparing of cards, you could very quickly take action to stop paying interest on that debt, and spread the cost of your Christmas excesses over 2 years, interest free.

Balance transfer cards can really help you manage your way out of debt if used carefully, and with the latest deals offerings a sensational 24 months of interest free all you have to focus on is which deal fits your profile best. Of course the card issuers don’t make it easy for you to avoid paying the interest that’s their bread and butter income; you have to work at it, but follow our simple step-by-step guidelines here and you’ll be better off in no time!

1. Firstly, find out who issued the credit card that you’re carrying the largest balances on. This is because lots of credit card companies issue cards under different brands and you need to understand which card company you’re actually with to know which offers are available to you. No credit card company will accept a balance transfer from a card that’s issued by a company within its group.

If your current ‘balance heavy’ card is issued by -

They also issue and underwrite cards or are jointly owned by -

Consider balance transfer to:-

Longest balance transfer period available currently

NatWest / RBS

Barclaycard

24 months

MBNA

Virgin Money & AA

NatWest or Halifax

23 months

Barclaycard

Halifax or NatWest

23 months

Virgin Money

MBNA

Barclaycard or NatWest

24 / 23 months

Lloyds TSB

Halifax BoS

Barclaycard or NatWest

24 / 23 months

HSBC / First Direct

Barclaycard or NatWest

24 / 23 months

Halifax BoS

Lloyds TSB

Barclaycard or NatWest

24 / 23 months

Capital One

Barclaycard or NatWest

24 / 23 months

2. The great thing about 0% on balance transfer credit cards is that they enable you to pay zero interest whilst you use all of your available month repayments to reduce the debt. So if you had a debt of say £2400 on a credit card that you were paying a typical interest rate of 18.9% on that would be costing you around £38 a month in interest. If you make a balance transfer to an interest free promotion of 24 months, and were able to pay back £100 per month over the 2 years you’d reduce your debt to £0, and save 24 months of x £38 interest = £912.

3. The only downside to balance transfer cards is the unwelcome balance transfer fees which usually range from 1.5% to 3.5%. These fees are there to discourage ‘rate tarting’ people just shifting balances around between lenders for interest free deals without ever really tackling the debt. As a general rule, card deals with the longest zero per cent periods have the highest balance transfer fees. However, if think you can clear your card debt within a shorter period than the 2 year maximum. If you search around in our balance transfer tables you’ll find several lenders offering reduced balance transfer fees mated to shorter 0% periods. This is significant opportunity to save money.

4. To be accepted for the best balance transfer deals, you’ll need to have a good credit score and a clear credit history. If you’re not over 21 and not on the voters roll, or have missed or made a late payment on a loan or credit card in the last 24 months, you probably won’t be accepted. You may be accepted and offered a higher interest rate, or offered a shorter 0% period. If you have any doubts about your credit history, get a FREE copy of your credit report and check out your track record.

5. Making the best of balance transfer deals takes planning and discipline. If you’re accepted for a new balance transfer deal, DON’T then use that card for purchases going forward. The way the interest rates work means you’ll lose the benefit of the 0% deal. This is obviously something the card issuer wants you to do, as it means your new card will start costing you money in interest! Set up the deal with a monthly direct debit to clear the old balance over the zero per cent period and then cut the card up!

6. Lastly, make a note in your diary to review your payments and position every 3 to 4 months, particularly when you arrive in the last year of the zero per cent deal. If it looks like you’re not going to be able to clear the outstanding balance before the promotional period ends, considered a new balance transfer to the best 0% deal at the time, but leave plenty of time. Most credit card companies take a month to six weeks to issue a new card and process the balance transfer.


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