Getting to grips with credit card debt


Christmas is traditionally a time for overindulgence and many Britons are now having to face the fact that they used their credit cards a little too much over the festive period. Fortunately, there are ways to mitigate the damage, and independent financial research company Defaqto has put together some useful advice on how to do this.


Reduce cost of existing debts
Consumers who have outstanding credit card balances that they are unlikely to pay off in the immediate future should shop around for a good balance transfer card, according to Defaqto. Several credit cards offer an introductory 0% rate for balance transfers, so it is worth finding a card with a lengthy 0% period.

Examples include the Barclaycard Platinum Credit Card, which offers a 0% rate on balance transfers for 17 months, and the MBNA Platinum Visa, with its 0% rate for 16 months. Customers can expect to pay a transfer fee, typically in the region of 2.9%, but will still benefit from a significant reduction in their cost of borrowing over the long term.

Consider a rewards card
People who usually pay off their balance in full each month should compare credit cards for one with a rewards structure. Some cards feature a points scheme, whereby cardholders accrue points whenever they use their card and can put these towards shopping or treats. Another type of reward-based credit card provides cash back, which means that the card provider pays the customer whenever they use their card. Consumers who are keen on travelling may even want to apply for a credit card that rewards its customers in the form of air miles. Examples include the Amex British Airways card, the Virgin Atlantic White card and the Lloyds TSB Airmiles Premier Duo.

Get 0% on purchases
Alternatively, Britons who need a credit card for spending but are not in a position to pay their balance off straightaway should look for a card that offers 0% on purchases for an extended period. For instance, the Tesco ClubCard Credit Card has a 0% introductory purchase rate that lasts for 13 months, while customers with current accounts at NatWest or RBS can apply for the banks' own Classic Cards, which also offer 13-month 0% purchase periods.

David Black, Defaqto's insight analyst for banking, said that the first few months of the year can be "difficult" and advised consumers "to make sure that your money works as hard as possible in the year ahead". Mr Black observed that there are good deals to be found, but emphasised the importance of shopping around to find the best offers. He concluded: "Importantly, people need to make sure that the financial products they have are those that best meet their needs and circumstances."

See related: Card users to transfer £2.8 billion in 2011, Capitalise on balance transfer credit card deals

Published: 1 February 2011