Don't get naked, just destroy your credit card debt

Make a decision today that will change the rest of your life for the better. (No nudity required.)

In an ideal world, none of us would be in debt on our credit cards. Or if we were, we would all have 0% credit cards, allowing us time and space to pay our bills without racking up any interest.

Either that, or we’d all be loaded.

Perhaps you are. Perhaps you are reading this on your iPad 2, lying on the deck of a yacht somewhere sunny, reflecting on your millions in the bank while a gorgeous, toned masseuse/model rubs sunscreen oil all over your naked flesh.

You’re not? You have my sympathy. It’s a hard life, but let’s look on the bright side. You are reading this article. (Hopefully, not naked.)

That puts you one step closer to living in that ideal world, and perhaps even one step closer to being loaded.

Because I’m guessing you wouldn’t be reading this if you hadn’t decided to try to get rid of your credit card debt. So - maybe you can hear it? - you’ve just ka-chinged your bank account. After all, most credit cards charge 16.9% APR. In plain English, that means if you clear your credit card balance this year, you will save £169 in interest (and potentially £100s in future years too) for every £1,000 of debt you’ve racked up. Ka-ching!

It’s not that easy

Wait a second... It’s not that easy, is it? Just simply wanting to get rid of existing debt doesn’t actually do you much good. I mean, everyone wants to do that. How you do it is another question, and that’s the one most of us struggle with.

For example, even though you may have existing credit card debt that you want or even need to get rid of, you still may not like the idea of redirecting your funds for having fun into those for being sensible. There’s no point in denying these things to me, and especially not to yourself - that could be what got you into debt in the first place!

Or perhaps your situation is more serious and, for whatever reason, you know you are going to struggle to pay off your credit card debt in the near future and still afford to buy all the stuff you need every month, never mind want.

Whatever your personal circumstances, you may have good reasons for wanting to spend interest-free for the next few months - while simultaneously wanting to reduce the interest-rate on your existing debts, so your problems don’t get any worse. You may feel that, once you’ve had a breather from any new interest payments, you can focus on getting rid of debts once and for all.

If so, then as I said at the beginning, you’ve come to the right place. Well done! The next bit - figuring out which new credit card will allow you to do this - is even easier.

‘Best of both worlds’ cards

Since I spent the third paragraph of this article imagining you naked, I feel we are intimate enough for me to admit something a bit embarrassing.

Here at lovemoney.com, the editorial team has come up with a geeky nickname for cards which offer 0% on both purchases and balance transfers.

We call them ‘best of both worlds’ cards. We call them this because they offer you the best of, erm, both worlds - the opportunity to spend interest-free, and the opportunity to pay off existing debts interest-free as well.

Most of these cards offer the same interest-free period for balance transfers and for purchases. It’s simply a matter of picking the one with the longest 0% period for both. Currently, that’s the Barclaycard Platinum Visa card, which offers 0% on both balance transfers and purchases for 14 months.

However, this card comes with a nasty sting in its tail:  it will charge you 2.9% of your balance as a fee for transferring over your existing debts.

If you need 14 months of interest-free spending, there’s no doubt this is a great ‘best of both worlds’ card. But if only you need to spend interest-free for a few months or you need a longer period of 0% interest for your existing debts, there are better options around.

For example, while the Lloyds TSB Platinum Mastercard only gives you three months at 0% on purchases, it offers 15 months at 0% interest for balance transfers. Best of all, there is a super-low balance transfer fee of 1.5%.

Similarly, the Barclaycard Platinum Balance Transfer Low Fee Card also gives you three months of interest-free spending, but this card offers 16 months at at 0% on balance transfers. However, the fee is slightly higher at 1.6%.

Finally, the newly launched Virgin Money All Round Card offers 16 months on balance transfers with a longer period of 0% interest on purchases: 6 months. But the balance transfer fee is higher again at 1.99%.

How do these cards compare? It very much depends on how much debt you have, and how long you need to spend interest-free. The more debt you have, the more important the fee is, because even a fraction of a percent could increase your costs significantly. So if you’ve got a lot of debt, consider taking out the Lloyds TSB Platinum Mastercard or the Barclaycard Platinum Balance Transfer Low Fee Card.

On the other hand, if your priority is to have as long as possible to spend interest-free, before you start addressing your existing debts, then the Virgin Money All Round Card or the Barclaycard Platinum Visa card may be the best choice. Work out how much the fee will cost you vis-a-vis how long you need interest-free and you should be able to make the right decision about which particular credit card to go for.

But please, please, please make sure you've either paid off your debts in full or made plans to switch to another 0% card before your interest-free period ends. Otherwise, you will be hit with exorbitant interest charges when the rate on your card jumps back up to around 17% APR.

Good luck... and here's hoping you one day get that yacht!

Top cards for purchases and debts 

 Compare credit cards at lovemoney.com