Banish your Christmas debts

If you've spent too much money over the festive period and you're not sure how to tackle your debts, follow these five tips.

So that’s it, Christmas is over for another year. The mince pies have been eaten, the presents unwrapped and all of that lovely Christmas bubbly has been polished off.

Yes it’s all a bit of an anticlimax. But if the thought of how much you’ve spent over the festive period is now starting to give you a headache, here are some top tips to help you banish your Christmas debt for good!

#1 Get better at budgeting

First things first. If you’ve got yourself into a bit of a financial pickle, you need to sit down and draw up a budget so you know exactly where all of your money is going.

All you need to do is work out how much income you have and how much your outgoings are. You can do this by using the lovemoney.com MoneyTrack tool as this allows you to log into all of your bank and credit card accounts at once and see all of your transactions at a glance. You can then categorise your transactions so you know exactly what you’re spending where.

Alternatively, you can use a statement of affairs calculator or this budgeting calculator from the FSA.

If your outgoings are pretty extensive, you’ll need to make some cutbacks to reduce your outgoings and free up a bit of spare cash. A good idea is to set yourself a budget for various different categories (such as petrol and food). You can easily do this using MoneyTrack and you’ll then be able to track your progress each month.

Once you’ve done that, you can start throwing your spare cash towards your debt!

#2 Pay more than the minimum

If you’ve got a lot of debt sitting on a credit card, try and pay off more than the minimum monthly repayment each month. You can use all of the spare cash from task one to do this!

This is because the minimum payment on credit cards is usually set very low – often as low as 2% of your total card debt – and as a result, it can take you a very long time to pay off your debt in full.

What’s more, if your credit card is charging you a hefty rate of interest at the same time, the amount of interest you’ll be forking out overall will be far greater too.

Even just making an extra payment of £10 a month can significantly reduce the time it takes to pay off the debt in full as well as the amount of interest you’ll be paying overall.

Find out more in This dangerous mistake could cost you £10,000.

#3 Get an interest-free credit card

The very best way to tackle credit card debt is to transfer that debt over to a 0% balance transfer credit card. That way you won’t have to pay any interest on that debt for up to 22 months!

Just make sure you’ve paid off your debt in full before the interest-free period comes to an end to avoid being whacked with a hefty interest rate.

If your debt is considerable, however, you may struggle to pay off your debt in full by the time the 0% deal has expired. In this case, you might be better off moving your debt to a lifetime balance transfer credit card instead. These credit cards offer a low rate of interest for the lifetime of the debt. So you can transfer over a balance and know that the interest rate will stay low until you’ve paid the debt off in full.

The Sainsbury's Low Rate card, for example, offers an interest rate of 6.9% and there’s no balance transfer fee! Find out more in The brilliant new debt-busting credit card.

#4 Learn how to snowball

This next tip has nothing to do with building snowmen.

Snowballing is a great technique to use if you’re struggling to get all of your credit card debts onto interest-free deals.

All you need to do is work out which of your credit card debts is charging the most interest. This is the debt that will grow at the fastest rate so it’s also the one you need to focus on first.

Keep paying the minimum monthly repayments on all of your other borrowings, and put any spare cash towards the most expensive debt. Once you’ve successfully paid off this debt, move onto the next most expensive debt and so on. Leave your interest-free debt until last.

This is a really effective way of tackling your debts and clearing them more quickly (as well as reducing the amount of interest you’ll have to pay).

#5 Seek advice

If your debts have really got out of control and you have no idea where to start, it’s a good idea to talk to someone about your concerns.

There are plenty of free debt advisory services that will give you advice on how to tackle your debt, such as the Consumer Credit Counselling Service, Citizens Advice, The National Debtline and Christians Against Poverty.

You don’t have to cope with your debt on your own, so if you’re really worried about your financial situation, make sure you ask for help.

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