13:31 31 January 2013
Christmas credit card bills will be landing on doormats over the next few days, providing millions of us with a nasty reminder of the true cost of the festive season.
However, there are plenty of ways to tackle your credit card debts so that you don't end up paying for Christmas 2012 for many years to come.
Here are our top 10 tips to help you take control of your credit card bills...
1. Set a budget
The first thing to do if you have debt is to keep your current spending to a minimum. Sit down with your bank statement and see if you can reduce any outgoings.
For example, do you have magazine subscriptions you could do without, or are you paying monthly gym membership you never use?
Reducing your outgoings will mean you have more to put towards paying down your Christmas credit card debts and will help you stay in control of your finances in future.
2. Reduce your interest
Check what rate of interest you are being charged by your credit card provider - the average annual percentage rate (APR) is a hefty 17.32%. But you could pay no interest at all if you moved the debt to a balance transfer card with an introductory 0% rate.
The current market-leading balance transfer card is Barclaycard's Platinum Credit Card with Extended Balance Transfer. This offers 0% on debt switched from another card provider for a massive 24 months. The fee is 3.2% of the debt transferred. When the two years is up, you'll be charged a representative APR of 18.9% (variable).
3. Cut interest on new spending too
If you have to rely on your credit card for spending, you can still keep control of any existing debts by switching to a card that offers 0% on both balance transfers and purchases.
The Halifax All in One credit card for example, offers 15 months at 0% on both purchases and balance transfers. After both interest-free periods end, you'll be charged a representative APR of 17.95% (variable). This card has a 3% balance transfer fee.
Alternatively, the Barclaycard Platinum with Purchase card offers 0% on balance transfers and purchases for 14 months, and after that has a representative APR of 18.9% (variable). Balance transfers are subject to a 2.9% transfer fee.
4. Clear what you owe within the 0% period
If you are planning on switching your credit card balance to a card offering 0% on balance transfers, be disciplined and make sure you can pay off what you owe during the introductory 0% period, otherwise you will end up being charged interest again once this period finishes.
If you can't do this, make a note of when the 0% period ends, and make sure you switch your balance to another 0% card then.
5. Don't miss repayments
Make sure you don't miss any payments or fail to pay on time as you will be hit with extra charges and you may lose any special promotional rate you are on. It could also damage your credit score which will mean you are less able to qualify for the best deals in the future.
6. Factor in fees
Don't forget about balance transfer fees if you are moving your debt to another card. Most balance transfer credit cards charge around 3% although some don't have a charge, or offer a reduced fee.
Barclaycard's Low Rate card for example, currently offers 36 months at 4.9% and has no balance transfer fee. Its Platinum Lowest Balance Transfer Fee card, meanwhile, has a 0% introductory period for 12 month for a 0.9% balance transfer fee. After the introductory period ends, the card has a representative APR of 18.9% (variable).
Lloyds TSB, meanwhile, is offering a 50% reduction on its balance transfer fee on its Platinum Credit Card until February 23. This cuts the fee to 1.50%, making it a good option for anyone looking to consolidate their debts. This card offer 0% on balance transfers for 21 months, and after that has a representative APR of 17.9%.
7. Pay off more than the minimum
Don't just make the minimum payment shown on your statement each month. Instead, try to overpay so you can clear your debt more quickly and pay less interest. If you don't pay off more than the minimum payment then you could end up saddled with credit card debts for years to come.
For example, according to calculations by MoneySupermarket, if you had a balance of £1,500 on a card with an average APR of 17.32%, making only the minimum repayment of 2.5% each month, will take 19 years and three months to clear the debt. You would also end up paying an extra £1,590 in interest in the process.
8. Use some of your savings
Interest rates on savings accounts are currently so low - even the best easy access accounts pay just 2.00% AER - that you are likely be better off using some of your savings to pay off any expensive credit card debts. However, make sure you keep some savings in place in case you need any cash in the event of an emergency.
9. Consider a low cost loan
If you are struggling to juggle several credit card debts each month, you may want to consider consolidating them through a low cost loan. This can be a good solution to banishing credit card debts if you want fixed repayments and to pay down what you owe over a set period of time.
The best loan rates are currently available on loans between £7,500 up to £15,000. Clydesdale rel="nofollow" and Yorkshire Bank, for example, is offering a representative APR of just 5.1% to borrowers looking to repay the debt over between one and five years - the cheapest deal of the century.
10. Help yourself
If you really want to avoid the temptation to rack up further credit card debts, then cut up your cards so that you won't be able to spend on them. And if your credit card debts have spiralled out of control and you really don't know how to start paying them off, seek professional help as soon as possible.
Your best bet is likely to be one of the free debt advice charities such as StepChange (formerly the Consumer Credit Counselling Service) or National Debtline. Look online for details.
Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.
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