Use These Credit Cards To Beat The Recession!

If your New Year's Resolution is to get out of debt, read this article!

Last week, my friends and I sat demolishing the last of the Terry's Chocolate Orange and chatting about our New Year's resolutions.

Mine are always the same (get rich and become super-healthy) so I feel a bit like I'm renewing vows rather than wiping the slate clean. perhaps I should set more realistic goals?

Amongst my friends, almost half had made the same resolution: Pay off their credit card debt.

If you're scrubbing up your finances ready for 2009, transferring your card debt could save you hundreds of pounds in interest payments.

Here, I'm going to talk about the plastic that could help you beat the recession.

The 0% option

A 0% credit card - as the name suggests - offers you 0% interest on balance transfers for a fixed period of time.

The market leader at the moment is the Virgin Money card. Its 0% deal lasts for a whopping 16 months (with a transfer fee of 2.98%).

You can also use this card to make cash transfers into your bank account, which are eligible for 0% interest in the same way. This means you can use the card to pay off more expensive debts, like an overdraft or loan.

On the downside, you'll be dumped onto a hefty interest rate when the 0% period comes to an end - the typical APR is currently 16.6%. This means you need to be really confident you can clear your balance (or switch to another 0% deal) before this happens.

If you'd like to find out more, I recently analysed the card's pros and cons in this article.

Breathing space

If you want to cut your interest payments, but you need more than 16 months to clear your balance, a long-term balance transfer card might be a better option for you.

In a nutshell, this sort of card offers you an affordable rate of interest for a long period of time - some even give you a low rate for the full life of the balance.

This means you only have to transfer your balance once - and (unlike a 0% card) you won't need to scour the market for another good deal in a year or so.

Top deals

Here are my top long-term balance transfer picks:

As you can see, the Barclaycard Simplicity card offers the lowest interest rate of the three, for the life of the balance.

Just remember that this rate is variable, so you have to keep an eye on it to make sure it stays competitive. And to get this low rate, the maximum you can transfer is usually £5000.

The Capital One Fixed Rate card has a higher interest rate - 8.5%. However, you can relax knowing this rate is fixed until August 2012, so it won't suddenly shoot up before them. In addition (unlike the other two) this card charges NO transfer fee.

Just remember.

You'll still be paying interest, so you can't just take these cards out and forget about your debts! Pay them off as soon as possible and you'll save even more in interest payments.

Finally, you should be aware that some long-term balance transfer cards come with a sting in the tail in the form of an annual fee.

The Citi/AAdvantage Gold card, for example, charges just 5.8% interest for the life of the balance. However - after the first year, you pay an annual fee of £25 for the privilege.

I think a long-term balance transfer card is a great option if you're determined to get your spending under control.

Just don't let your other New Year's resolution - and the expensive gym subscription that comes with it - undo all your hard work!