Was this month’s credit card bill a shocker? Here’s how you can take control of your debt

Tuesday, January 28, 2014

If you overdid it on the Christmas treats, your credit card bill may be looking flabby this month… Lucky, then, that we have a five-point plan to help you take control of your debt and get back to saving!

Credit cardsMost of us are prone to overspending at Christmas, despite our best intentions. In fact, research by Halifax found that the average spend for Christmas 2013 was £482, with more than a third of people expecting this debt to linger well into 2014.

If you'd prefer to put this behind you, here's a five-point plan to help you get back in control of your credit card and maybe even start saving again. 

5 point plan to take control of your debt

1. Take control

First, don't ignore it. Gather together all your statements and assess the best course of action. If you can clear the debt without racking up too much interest; great. If not, consider moving it to a cheaper card or even consolidating it into a personal loan with a lower interest rate.            

2. Lose interest

If you have to carry some credit card debt into the new year, make sure you're paying as little as you can for it. The average interest rate is around 17%, with some cards charging well in excess of 30%.

Thankfully, there are loads of cards that charge a lot less, with plenty of providers happy to offer a 0% interest balance transfer deal, giving you a fighting chance to clear your debt without racking up any more interest.

There's usually a fee - typically up to 3% of the amount you're transferring - but this can be a lot smaller than the amount of interest you save.

3. Avoid penalties

Penalties for forgetting a credit card payment - typically a £12 charge - can add to your debt and make it harder to borrow money in the future. Additionally, if you've switched to a 0% balance deal, a late payment can be the perfect excuse for the card company to cancel the offer and push you back on a sky-high rate.

It's easy to make sure you don't forget a payment by setting up a direct debit to cover the minimum payment every month - or to clear the balance in full.

4. Reduce your household expenses

Unfortunately, you'll never get rid of all those bills for household expenses such as insurance, energy and internet - but you can usually cut them down. By comparing deals on comparison sites such as moneysupermarket.com, comparethemarket.com and uswitch.com you could save hundreds of pounds a year ­- potentially enough to pay for Christmas.

5. Back to basics: let's talk budgets

With your credit card under control and your household finances slimmed right down, setting up a budget will give you the discipline to keep your spending on track. It may sound simplistic, but working out exactly how much money comes into your home and what your essential monthly outgoings, from mortgage payments to travel and food are, will really help to focus your mind. Once you've deducted your outgoings from your income, you'll be clear about the amount you've got to spend on everything else, including your savings, through the month.  

Want to know more?  Our 8 tips to paying off your credit card debt is packed full of useful information.

This blog is intended to provide information, not financial advice, to help you make an informed decision about savings and investments. We do not offer financial advice.  You should contact a financial adviser, who may charge a fee, if you want financial advice. 

Source: ICM Research for Halifax