How do I get out of credit card debt?

Want to know how to get out of credit card debt or store card debt? It's easy when you know how...

For me, there's two sides to Christmas. There's the happy side, the side that everyone knows about, that involves family, trees, presents, Santa Claus.

And then there's the dark side. The side no one really talks about. The side that involves excessive spending, Christmas credit deals, desperation, debt and despair.

If you're worried about the size of your credit card or store card debt, you're not alone, and you're not helpless. There is a way you can take control of your debt and even get rid of it altogether. In fact there are three ways!

How do I get out of credit card debt? Take out a credit card!

It might seem contradictory, but one of the best ways to get out of credit card debt is to take out another credit card.

Specificially, take out a 0% balance transfer credit card and transfer all the debt on your other credit cards to this card. You will have to pay a balance transfer fee of two or three per cent, but then you pay no interest on your debt for up to 24 months on the market-leading Barclaycard Platinum. During this time, you should try your best to pay off your debt in full. If you don't manage, be prepared to switch your debt to another 0% balance transfer card before the interest-free period ends or you will be hit with a nasty hike in the rate. You will also have to pay a transfer fee of 3.2% of the balance, upfront, but the saving should still make it worth your while.

Here's an example of how much your current credit card or store card may charge in interest over the next 24 months:

For simplicity, this table doesn't take into account any payments you make on these cards, because this will vary depending on your circumstances. But unfortunately, no matter how large your payments, it is unlikely you will make much headway towards clearing your debt due to the high rates of interest you are being charged.

Transfer all that debt onto a 0% balance transfer card, and the table looks like this:

As this example shows, someone with debts of £10,000 on store cards and credit cards, could save more than £3,000 by switching their debt to a 0% balance transfer credit card.

Put all your payments towards paying off your debt before the interest-free period ends, and you'll be debt-free by Christmas 2013!

Get out of debt with a low rate personal loan

If you do not qualify for a 0% balance transfer card, or are unable to transfer all your debt onto this card, consider consolidating any remaining debts into an unsecured personal loan. This is like bundling up your debts and putting them all in one place, so you only have to make one payment every month. The interest rate on a personal loan is normally much lower than the rate charged by store cards and credit cards. What's more, you can set the monthly payments at a level you can afford by spreading them over a period of time.

Personal loan rates have come down dramatically in recent months, and market-leading loans now charge just 6.2% APR.

Example:

As you can see, if you left your £10,000 of debt on your credit and store cards and you paid it off within five years, it would cost you £257 a month and £15,428 in total.

Transfer all that debt onto an unsecured personal loan, and the table looks like this:

So you'd save yourself £64 a month and £3,820 in total over five years.

A word of warning though: if you're a homeowner, think very carefully before consolidating store card or credit card debt into a secured loan. If you can't meet your repayments on a secured loan, you run the risk of losing your home. With an unsecured personal loan, it's much harder for the lender to repossess your property.

Compare credit cards and loans at lovemoney.com