Written by: Cally Worden
The inevitable monthly flop of the credit and store card bills on the mat is enough to make the heart sink a little. The weight of the debts can hang over you like a cloud; it’s a natural instinct to try to forget all about them. But deep down we all know that shoving the bill under a pile of other papers may place it out of sight, but it’s never far from our minds. No, the only real solution is to take ownership of your debts and make it a mission to get them sorted. Be proactive, your debt burden will instantly feel lighter as you start to feel more in control. Here are some practical things you can do to start tackling those pesky card debts today.
Paying off just the minimum repayment amount each month may keep the wolves (and debt collectors) from your door, but it does nothing to start paying off the debt itself. In fact, depending on your credit terms you could even end up with your debt increasing because your interest charges keep on rising. If you genuinely have no slack, paying the minimum is the responsible thing to do, but if you can possibly find even just a few extra pounds to contribute towards your debt repayment each month it can make all the difference. Slowly but surely you will start to chip away at reducing the amount you owe.
Target your Cash
Take a long hard look at all of your card debts and work out which ones are charging you the highest rates of interest. These are the ones that are costing you the most money. It makes sense to channel every available penny you have into paying off these debts first. The higher the interest rate, the longer it will take you to pay off the debt and the more it ends up costing you. As a rule of thumb, always tackle your most expensive debts first – this approach will make the little spare cash that you do have work as hard as possible for you.
Look at Doing a Balance Transfer
If your credit rating is reasonable, there will be lenders out there who are keen to secure your business, despite your debts. In order to draw you in many will offer an interest-free balance transfer option. This allows you to transfer your existing debt onto a new card that will give you an interest ‘holiday’ for an agreed period of time. This means that any repayments you make during that holiday period will make a direct contribution to the reduction of your debt. Instead of paying off the interest, you will be actively reducing the amount you owe.
There may be a charge (usually a % of the balance you are transferring), but provided you keep up with your repayments each month this charge will usually (do your sums to check this) be more than offset by the lack of interest charges. If you keep an eye on your transfer dates you can repeat this balance transfer process numerous times until your debt is paid off. The accumulated fees for transferring are likely to be far less than the overall interest you would have to have paid by staying put with your original card provider.
Which and MoneySavingsExpert websites have free online card comparison calculators that help you work our whether it’s worth transferring your balance to a new provider. This could be the most valuable solution for you.
Tap into your Savings
The interest paid on savings accounts is usually much lower than that which you are charged on borrowing. It may feel secure to have funds in a savings account, but it makes no sense to have money sitting there while you feed the interest-grabbing card debt. If you have savings then use them to repay your expensive card debts, transfer your monthly repayments back into your savings account until you have paid yourself back.