With the festive break now past, many households will be desperately trying to get their finance back on track after two weeks of lavish spending.
The most important area to focus your attention (after your mortgage, of course) is on whittling down any debt on store and credit cards, which charge an extortionately high rate of interest – on average 24.3% and 17.73% respectively.
The most important thing to remember is that paying interest is entirely optional.
Egg offer 0% on balance transfers for 15 months
Switch the debt
Your first step should be to switch all your debt to a card offering a lengthy interest free period on balance transfers.
Despite all the talk about the credit crunch, the best credit card deals are still on the market. While it’s true you may be charged a higher typical APR than the advertised rate, this shouldn’t be an issue provided you are prudent enough and pay off the debt before the introductory offer expires, or simply switch again to another cheap deal.
The leading balance transfer credit cards include the Egg credit card with 0% on balance transfers for up to 15 months, the NatWest Classic (13 months) and the Lloyds TSB Platinum Mastercard (12 months).
Compare all our balance transfer credit card best buys here
Mind that fee, though
Sadly, banks levying ever larger ‘balance transfer fees’ on these cards as a way of ensuring they at least make some money out of you, and while these are still far less expensive than paying the full APR on a credit card, they are still worth considering.
Both the Lloyds Platinum TSB Mastercard and the Egg credit card charge a 3% balance transfer fee, while Natwest charges a more attractive 2.5%. So if you are certain you will be able to pay off the debt within 13 months, then you should choose the NatWest card, while if you need those couple of extra month breathing space then it’s the Egg card you should go for.
If you know you will need significantly longer than Egg’s 15 months to pay off your debt then you will need to switch between cards before the introductory rate expires (the switching part is easy, it’s the remembering when to do so that catches most people out).
Click here for top balance transfer deals
Not a rate tart? Then commit to your card
If you have a large debt but can’t be bothered with switching constantly when the introductory rate expires, you should consider a credit card that charges a lower rate of interest for the life of the debt instead.
Your best bet for this would be the CitiBank Platinum Mastercard, which charges a 5.8% rate with a 3% transfer fee. Barclays Simplicity offers a slightly less competitive 6.8% rate, but it has a 2.5% transfer fee and is still far cheaper than using a standard credit card for life.
One final card available to you is the HSBC credit card, which is a middle ground option between short term interest free and low rate for life deals. It currently offers a rate of 2.9% on balance transfers for two years (2.5% transfer fee), reverting to a typical APR of 15.9% thereafter.
Search for the best low rate credit card here
Trim your financial waste
Credit cards are the easiest way to get into debt as they allow you to make purchases at the drop of a hat (and with the proliferation of online shopping, it is getting easier still).
Yet it is also the hardest debt to get out of, due to the sky high rate of interest charged. By switching to an interest free, or low rate option, you make that task far easier.
Click here for top balance transfer deals
