How to pay off your credit card and slash your debts
You can slash the cost of your debt if you use a balance transfer card - as long as you use them properly
IT'S fair to say Brits' love affair with plastic shows no signs of ending.
Millions of us don't think twice about reaching for our credit card for everyday spending or splashing out and putting the summer holiday on it.
In total, we've got an eye-watering £61billion in outstanding card debt but what about when the bills finally come through the letter box?
There are increasing concerns that Brits are carrying too much debt with watchdog the Financial Conduct Authority (FCA) warning that five million of us are struggling to to clear their debts.
But there is a way you can cut the cost of your bills - potentially by thousands of pounds - and interest payments by switching your debt to a balance transfer card.
There's a few things you need to be aware of but if you use them properly, they can make a real difference to the cost of your debts.
Here's what you need to know about how you can save thousands of pounds.
What if you could get a credit card that helps you pay off your debts?
If you've had your credit card for a while, then you're probably racking-up lots of interest.
You might also be one of the 1.6million Brits who only pay the monthly minimum payments, meaning your balance takes longer and longer to clear.
And the chances are you have an interest rate of 16 to 19 per cent per year.
That mean you're only adding to your debts instead of paying them off. You might feel like you're in a circle of endless debt and there's no way out.
Well, with a 0 per cent balance transfer card you can stop accruing that interest and clear your outstanding debts quicker and much more cheaply.
You can even get one that last for 43-months. This mean you won't pay interest during this time and it allows you to wipe your slate clean.
Finance expert at the website Rachel Springall said: "It seems senseless to let any credit card debts incur interest when you can switch them to an interest-free balance transfer credit.
"Consumers could be throwing money away by not taking time out to switch their debts onto a 0 per cent deal."
HOW TO DO A BALANCE TRANSFER
APPLYING for a transfer is just like taking out a new credit card.
Use a comparison site to find to see what deals would be best for you and follow the provider's application process.
Remember that you'll be credit checked and only those with the very best credit history will be offered the headline 0 per cent period.
MoneySavingExpert has an you can use to see what cards you are likely to be accepted for before you apply.
Different providers will let you transfer different amounts - Barclaycard for example will let you transfer a minimum of £100 up to a maximum of 90 per cent of your credit limit.
Typically a transfer will only take a couple of days but sometimes your new provider might need to make a few additional checks which can make the process a little longer.
How much could I save with a balance transfer card?
Potentially thousands.
Figures put together for The Sun Online by Moneyfacts show how much you could save by shifting your existing debt onto a balance transfer card instead.
For example, if you have £3,000 on your card it will take you a mammoth four years and seven months to clear it completely, if you make the minimum repayments of around £80 a month.
And worst of all - you'll pay back an eye-watering £4,366 - that's an extra £1,366 in interest payments.
But if you were to switch your debt to one of the longer deals on the market - - you could clear the debt within the 0 per cent period by paying £80 a month and not pay any interest at all.
HOW TO CUT THE COST OF YOUR DEBT
BEING in large amounts of debts can be really worrying. Here are some tips from Citizens Advice on how you can take action.
Check your bank balance on a regular basis - knowing your spending patterns is the first step to managing your money
Work out your budget - by writing down your income and taking away your essential bills such as food and transport.
If you have money left over, plan in advance what else you’ll spend or save. If you don’t, look at ways to cut your costs
Pay off more than the minimum - If you’ve got credit card debts aim to pay off more than the minimum amount on your credit card each month to bring down your bill quicker
Pay your most expensive credit card sooner - If you have more than one credit card and can’t to pay them off in full each month, prioritise the most expensive card (the one with the highest interest rate)
Prioritise your debts - If you’ve got several debts and you can’t afford to pay them all it’s important to prioritise them.
Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don't pay
Get advice - If you’re struggling to pay your debts month after month it’s important you get advice as soon as possible, before they build up even further.
Groups like Citizens Advice and Money Advice Trust can help you prioritise and negotiate with your creditors to offer you more affordable repayment plans
You can even save if your balance is smaller.
If you've got £1,000 on your card and are paying off a minimum of £30 a month, it'll take you nearly four years to clear your balance - and you'll fork out an extra £378 in interest.
But by swapping your debt to a balance transfer card you could clear the debt in three years - 12 months quicker - and not pay any interest at all.
This sounds great but there must be some cons?
Unsurprisingly, credit card providers aren't going to offer these sorts of deals unless there is something in it for them.
The firms rely on you not clearing your balance when the 0 per cent period comes to an end so it can start charging you interest and make money.
So you must try and clear your balance before the offer comes to an end - otherwise you'll start being charged again.
Make sure you never miss a payment and try and pay at least more than the minimum payment off each month - otherwise you could lose the 0 per cent deal.
When you complete a transfer, the card company will also charge a fee too.
It's not too much - - is 1.75 per cent so on a balance of £1,000 you'll pay £17.50 - but it's something to be aware of.
More on money
Like with all credit cards, you might not be offered the headline 0 per cent period if you don't have the best credit history.
And whatever you do try not to spend on the card either - as otherwise you'll just be increasing your balance and it'll take longer for you to become debt free.
"The longest interest-free deals can charge the highest fees and it could be tempting to repay just the minimum requirement back on a card, but borrowers should be aiming at clearing the debt before the 0 per cent deal ends," Ms Springall warns.
"Before consumers apply for a balance transfer credit card they would do well to check their credit score as a good score can show lenders that the applicant is worthy of the deal, plus it’s so quick and easy to do, so it’s really worthwhile."
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