Three hot tips to cut your credit card debt
Posted July 21st, 2009 Credit card firms aren’t always as honest and open as we’d like. The government is planning to crack down on some of the cheeky ways they try to extract money from us, by banning credit card cheques, unsolicited limit increases, obscene interest rates and the use of ‘negative payment hierarchies’.
Although these plans are well intentioned, they will take time to implement; there is no silver bullet to save us from debt, so we’ve come up with three rules to help you manage your credit card debt.
Never take cash from a Credit Card
Your credit card is not a debit card, please never use it to take out money from a cash machine. Emergencies excepted obviously, real emergencies only. When you take cash out from your credit card, there is no interest free period, and you get charged from that moment at the highest rate. The same principles apply to credit card cheques. If you are doing either of these things, you’re handing money straight to the bank with no real benefit to you.
Have 2 credit cards, one for spending and one for debt
Keep your existing debts on a card with a long 0% balance transfer rate – the best at present is the Virgin Credit Card with a 16-month deal. Then use another separate card with a low APR for purchases – top of the tables is the, which offers 0% on purchases for 12 months.
Always pay off more than the minimum balance
Barclaycard recently announced a reduction on the minimum repayment on its credit cards from 2.25% to 1.5% of the outstanding balance. Under the original system, a £5,000 debt on a Barclaycard would take 31 years to repay if you were just making minimum repayments each month, accruing £5,900 worth of interest. The same amount paid back at the new minimum rate of 1.5% would take 98 years to pay back, with £22,300 interest accrued.
To avoid this lunacy, set up a regular payment system for as much as you can afford. This means you’re paying back as fast as you can and the proportion of debt you’re repaying increases with each payment.
If you’ve got a large amount of credit card debt, then it’s going to take a while to pay back, but with patience and a little extra work, you’ll be out of debt very soon.
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Comparison of Top 10 Credit Card Offers
| Credit Card | Card Details | Interest Rate | Cash Advance Rate | Balance Transfer Rate | Annual fee | Interest free days | ||
|---|---|---|---|---|---|---|---|---|
 Halifax All in One Credit Card |
The Halifax All in One credit card offers a great introductory rate, and is perfect for saving you money now as well as in the future. | 15.9% APR | 27.95% p.a. (variable) | 0% for 9 months | No Annual Fee | 59 Days interest free |
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 Virgin Credit Card |
As well as a great rate, the Virgin Credit Card comes with:
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16.6% APR (variable) | 27.9% p.a. (variable) | 0% for 16 Months (2.98% fee on balance transfers) | No Annual Fee | 50 days on card purchases |
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 Capital One Classic Visa |
This card is designed for people with bad credit ratings, this is why the rate is quite high. |
Typical 34.9% APR variable | 34.9% APR | 34.9% APR | No Annual Fee | 56 days for purchases. 0 days for balance transfers and cash. |
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As well as earning Flying Club miles which you can spend on brilliant rewards like flights, upgrades, car hire and more, a Virgin Atlantic Credit Card gives you up to 46 days interest free on card purchases. |
17.9% APR typical rate | 20.9% p.a. (variable) | 0% for 6 months (2% handling fee) | No Annual Fee | Up to 46 days on card purchases only. |
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The Virgin Prepaid MasterCard from Virgin Money is a prepaid Mastercard that you can add funds to, and use these funds for normal purchases. |
N/A | N/A | N/A | N/A | N/A |
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5% cashback on purchases in your first three months (up to £4,000 of spend). Thereafter, earn 0.5% on the first £3,500, 1% on £3,501 to £10,000, and 1.5% after £10,001. |
18.9% p.a. | 27.9% p.a. | 18.9% p.a | No Annual Fee | 56 days for purchases. 0 days for balance transfers and cash. |
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Vanquis Visa Card is designed for people with no credit history or who have previously had bad debt. Representative 39.9% APR (variable) |
Representative 39.9% APR (variable) | 39.9% | N/A | No Annual Fee | Up to 56 days on card purchases only |
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The award winning prepaid card with no credit check or bank account needed. | Funds in your Account will not earn interest | Prepaid only - N/A | Prepaid only - N/A | £59.40 p.a. (£4.95/month) | Prepaid only - N/A |
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