Credit card debt: How to balance the books in 2022

Martin Lewis advises on reducing debt on credit cards

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The pressure to spend more over the festive period can see many Brits’ finances stretched to the max. Many may have dipped into their overdrafts as they struggle to pay for the extra luxuries often expected over the Christmas period. has spoken to an expert to find the best ways to help you sort out your finances as you head towards 2022.

Analyse what extra funds you may have

Aseem Munshi, Founder of financial app, Updraft, told if you have any savings or if you have any spare funds in your current account, you might want to use these to clear your debt.

He said: “This is because the interest rate you pay on your credit card is likely to be higher than any interest you make on your savings.

If you don’t have any savings, he recommended Brits look at their budgets to see where they might make savings.

These savings can then help chip away at your credit card borrowing.

Look at transferring your debt

Credit cards charge a huge amount of interest which can see your debts spiralling out of control.

Mr Munshi said: “You could see if you have any deals on your credit cards so you can transfer the balance and reduce the amount of interest you are paying.

He added: “The other option is to look for a loan, which has a lower rate of interest, that will help you pay off your borrowing.”

Balance transfer cards can also be used to help you manage your debts.

These cards typically charge very low or zero percent interest rates on the transferred debt for a set period. Usually, this is up to one year.

This gives you time to pay off what you owe the bank without the interest building up.

But be sure to make regular repayments or you risk getting further into debt.

Not all credit card debt is bad

Although being in debt is never a good thing, if you use your overdraft responsibly, you might boost your credit score, which could help you in the future.

Mr Munshi said: “Not all credit card debt is bad.

“Having some history of being able to manage borrowing money is good for your credit score, which is important for things like getting a mortgage.

“Credit cards also offer protections on some purchases you make if a retailer goes into administration or the item you buy is faulty – all good things.”

But he urges Brits to use credit cards with caution and to make sure they pay off their overdrafts each month.

Credit card borrowing can easily build-up, as their interest rates are often high.

This means going into your credit card’s overdraft can be a very expensive form of borrowing.

If you don’t have a steady monthly income or have struggled with debt in the past, it may be best to avoid using credit cards.

Instead, opt for debit cards, as you won’t be tempted to borrow money you may not be able to pay back on time.

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