The financial expert is on hand to help us pay off our debts faster – here's how
Martin Lewis is on the case again – this time to help us with our rising credit card debt that we just can't seem to clear no matter what we do.
And, with Christmas coming up, we'll happily welcome any help from everyone's favourite financial expert.
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In his Latest Tips email newsletter, Martin shares 8 ways to get your debts down or cleared completely.
And the Money Saving Expert also has advice on where to go for emotional support too.
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— Martin Lewis (@MartinSLewis) November 2, 2023
'I've come up with an 8-step plan'
He said:
'If I've got a catchphrase, it's definitely a loud "pay offIN FULL" when it comes to credit cards, then you get the benefits and pay no interest. Yet new UK Finance stats show credit card debt is up 9% in a year, and 50% of that debt has interest charges levied on it.
'For some, that's due to inertia or apathy, but for many, it's likely about being rejected for lower interest deals.
'So I've come up with an 8-step plan. There's no perfect solution, but if there is a route, following these steps should find it.'
1. See if you're eligible
The first tip that Martin gives is to see if you're eligible to transfer your debt over to a balance transfer credit card. This means you'll pay this new card off instead of your debt, but at 0% interest.
This way, he adds, you'll actually be making a dent in your debt and be paying it back, rather than just paying the interest fees.
The money expert said that while some people often assume they'll be automatically rejected for a balance transfer credit card, you can use a balance transfer eligibility calculator to see if you're eligible.
2. Don't assume you'll be rejected
Even if you have low odds of getting 1 of these cards, you're still in with a chance, says Martin.
He adds:
'A 20% chance means 2 in every 10 applicants are accepted – you could be one of those 2.
'If you've only a low chance, it's worth a try.'
Quoting 1 of his followers, Martin said it got him £1,300 extra help towards his debts.
3. Move what you can
If you are able to get a card, but the credit limit isn't enough to shift your debt, move what you can, advises Martin. He adds:
'Once you've applied for a card, it marks your credit file, so don't waste that. Use it to shift as much of your highest interest (APR) debt as you can to get it at 0%.'
Once you've done that, you can check your eligibility again and 'move what you can there'.
But he cautions:
'Each subsequent application can get harder, as too many can look to lenders that you're desperate for credit.'
If you have a balance transfer card, you'll also have to make sure that you never miss the minimum payment, or you could lose the 0% deal.
And you'll also need to clear the card before the 0% ends, or else face higher interest rates.
4. Approach your existing lender
Other lenders will allow existing customers to shift their debts onto them in an existing customer balance transfer. So, it's worth checking to see if this would be the case for you.
While they aren't usually as good as new cardholder 0% finance cards, they're better than nothing.
Banks usually send these deals out in their marketing emails, but it's also worth giving them a call to see if they'll move your debt over in this way.
And, if you have more than 1 credit card, 'call them all to see if they'll offer this' says Martin.
5. Be wary of cards aimed at people with poor credit
As these usually have a much shorter 0% transfer period, says Martin. And he says these are only really worth it for a short term switch, if at all, because the interest rate after the 0% ends will be 'horrid'.
6. Try to move your debt somewhere cheaper
Even if you can't move your debt to a 0% interest credit card, you can still move it to a cheaper card, with lower interest rates.
This will help you pay off more of your debt than if you keep your debts on your current card.
In doing this, you could move stuff around between cards, which will give you the best chance at shifting your debts.
Martin gives this example:
- Card A.Debt: £2,000, credit limit: £2,800, APR: 18%.
- Card B.Debt: £1,000, credit limit: £1,000, APR: 25%.
— StepChange (@StepChange) November 8, 2023Today, we've shared our new Client Insights Report, 'Bearing the Burden: Unravelling Women’s Debt Dilemma’. This report examines the situations of women who are dealing with problem debt when living costs are going up.
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7. Focus on clearing the highest APR cards first
We've written before about Martin Lewis's 'snowball' trick to help you clear your debts faster before.
The technique involves paying off your higher interest rate (APR) credit cards, or higher overdraft, first. This is the debt that's growing more quickly, so makes sense to pay this one off first.
This one is the 'priority', Martin adds.
'Once you've moved all your debt to where it's cheapest, list all your cards and loans in order of APR,' he advises.
'Then focus all spare cash on clearing the highest rate debt, paying just the minimum on all others. Once it's clear, focus on the next highest rate, and so on. This will get you debt-free quickest.'
If you've got a loan to pay off, it's slightly more complex, Martin adds, as there can be early repayment penalties.
The only exception to this, Martin adds, is if you've got a 0% card that's due to end soon, because it will move to a 'hideous rate'.
Instead, aim to ensure it's interest-free by the time it ends.
8. Get free help if you're in debt
Last on the list is free debt help if you do find yourself in debt.
1-to-1 debt counselling help is available from many organisations, including Citizens Advice, StepChange and National Debtline, while CAP will offer emotional support.
These organisations can help give you a 'Breathing Space' from your creditors and help answer any financial questions you may have.
You can read our article on answers to family debt questions with StepChange here.
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