Most effective way to tackle credit card debt and clear your balance faster

New research from GoCompare Money nas found that 16 per cent of Brits have started 2021 with credit card debt which 12 per cent will carry all year.

The UK’s collective credit card balance stands at £61.4 billion, much of which will be racking up interest at the card issuers’ standard APR, typically around 25 per cent.

The study of over 2,050 UK adults looked at people’s personal financial expectations for 2021 and discovered that 40 per cent are anticipating a tough year ahead.

When looking at where they could reduce their outgoings in 2021, nearly a quarter (24%) of those surveyed identified credit card and loan interest rates as an area where they could save money. However, only 9 per cent had changed credit cards in 2020, despite credit cards being one of the easiest financial products to switch.

An effective way to tackle credit card debt is to transfer the balance to a card with an extended interest-free period.

This type of card allows consumers to pay-off their debt quicker because during the zero per cent period all their repayments go towards reducing their debt, rather than interest payments.

Zero per cent balance transfer cards typically carry a fee of around 1.5 per cent to 3 per cent which is added to the debt, but some card providers offer deals with no transfer fee and a 0 per cent free period of around 18 months, so it is still well worth switching.

However, if the balance is not repaid in full by the end of the zero per cent period, interest will be charged on the remainder of the balance at the card provider’s standard rate.

Credit cards with the most beneficial terms are usually only available to applicants with a good credit history.

GoCompare Money is encouraging people to carry out a ‘soft search’ or ‘smart search’ to check their eligibility when looking for credit, this will help them find products that they are likely to be accepted for- without damaging their credit score.

Sally Jaques from GoCompare explained: “When you apply for a credit card, the application leaves a mark on your credit score. Unsuccessful or repeated applications can have a negative effect on your credit score by making it appear that you’re desperate for credit - which will sound alarm bells with providers.

“Unlike a formal application, a soft search lets you check what credit deals you are most likely to be accepted for without leaving a mark on your credit score.”

The GoCompare Money soft search tool simply requires you to enter a few details, including your name, date of birth, address, and employment details. These are then used to carry out a soft search on your credit record, the results will show you how likely you are to be accepted for each credit card.

Sally Jaques added: “The economic slump caused by the coronavirus has caused lenders to withdraw products and to tighten their eligibility criteria, so there are fewer 0% cards on the market.

“Having said that, there are still some attractive deals on offer and, a 0% balance transfer card can save you a great deal of money. If you’re successful in applying for a card, make sure you know and keep to the terms and conditions. For example, if you miss a repayment you may forfeit the whole interest-free deal.”

GoCompare Money’s top tips on managing credit card debt

Take control

When your card statement arrives, don’t ignore it, your debt will increase as interest is added to the outstanding balance.

Don’t just make the minimum repayment

Interest is added to any outstanding balance so the longer you take to repay the debt, the more money you will owe.

If you have more than one card, pay off or switch the most expensive card first

Switch your balance to a card with an extended 0% period on balance transfers. Alternatively, if you are unlikely to repay a significant part of your debt during the 0% 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.

Protect your credit score by using a soft search before applying for a credit card

The safest way to check your eligibility without impacting your credit score.

Avoid fees for missed payments and cash withdrawals

These are often higher charges which will only increase your debt.

If you are facing significant financial difficulties, talk to your credit card provider to see what help is available in terms of a payment holiday or a new repayment plan.

For more information on balance transfer cards visit the GoCompare website here.