With many Brits struggling to make ends meet some are turning to credit cards to help out but without careful management card debt can quickly get out of control.
Research by Gocompare.com has revealed that 26% of Brits expect to owe money on their credit cards throughout 2012.
The rising cost of living/bills is causing the biggest financial worry and a quarter of people want to find ways to save money on their outgoings in the coming year.
When asked where they could make these savings, 49% felt that they could save on food shopping and 31% saw the saving coming from petrol and transport costs. Other areas for saving included TV, mobile, internet and home phone costs, gas and electric costs and car insurance as well as credit card and loan costs.
Of concern though is that 9% admit they are relying on their plastic to make ends meet. Whilst this may be a good strategy for some, as Jeremy Cryer, Gocompare.com’s head of credit cards commented, “when used to plug a gap in everyday spending, card debt can quickly spiral out of control”.
And added “It is clear from our research that a huge number of people are already expecting 2012 to be a ‘year of debt’ so it’s important that they take action now, rather than allowing interest to add to their financial burden.”
With the help of Gocompare here some tips on how to get rid of your credit card debt this year.
1. Take control – for example when you receive a statement, don’t just ignore it and let interest get added which will increase your debt.
2. Don’t just make the minimum payment – if you do this, interest is added to the outstanding balance, increasing your debt and meaning it will take longer for you to repay your outstanding debt.
3. Pay off most expensive card first – if you have more than one credit card and a limited amount of money to use to pay off balances, pay off the one one with the highest interest rate first
4. Switch credit card – make use of 0% balance transfer periods. these usually charge a small balance transfer fee of around 3% which will initially be added to the debt but is still worth doing if you can get 0% interest for 24 months*. Alternatively, if you are unlikely to repay a significant part of your debt during the 0% interest free period, switch to a card with a low interest rate for the lifetime of the balance transferred. This will immediately reduce the interest rate until the debt is paid off.
5. Avoid fees for missed payments – these can typically be £12 for a missed payment.
6. Don’t use your card for cash – the additional charges make this an expensive way to borrow money.
MoneyHighStreet comments: “If you are struggling with your finances, try making a budget so that you can see what money you have coming in each month, what ‘must have’ payments you have each month, such as heating bills, food bills etc and then assess the ‘nice to have’ to prioritise which ones can stay and which, if any, may have to go.
“Whilst having a budget may seem difficult, it really isn’t. There’s lots of help available, for example on the Government moneymadeclear website and here on MoneyHighStreet, as well as money management software to use to record your financial transactions.
“Opting for a 0% balance transfer credit card to help with your debt repayments is a very sensible option to consider BUT only if you know you will be able to repay the outstanding debt during the 0% deal period. If this is not the case, you need to consider other options which may be better.
“Ultimately dealing with your personal finance matters has to take into account your own specific circumstances, seek professional advice and guidance if need be to help make the best decisions.”
At the time of writing zero percent balance transfer credit card deals available include:
Barclaycard Platinum Visa with 2 years interest free balance transfer (3.2% handling fee applies), 17.9% APR variable or 16 month 0% with handling fee of 1.6%, 18.9% variable. Click here for more details.
Nationwide credit card with 17 months zero per cent balance transfers, 15.9% APR Representative (variable). Click her for more details.
* Based on the Barclaycard Platinum Visa Card which currently offers 0% for 24 months for balance transfers subject to a 3.2% handling fee.