How to save £300 off your store card balance by transferring to a 0% credit card
SHOPPERS can shave up to £300 off bills by switching their store card debts onto a 0 per cent balance transfer credit card.
Thousands of us relied on credit to get us through Christmas, sticking an average of £399 on plastic, but January has brought with it a financial hangover and we're looking for ways to save cash.
Some store cards offer decent perks, like 20 per cent off your next shop, but as Rachel Springall from moneyfacts.co.uk points out the high interest rates could wipe off any discounts applied for taking one out.
Rates rocket to up to 34.9 per cent APR - to put that in perspective the top 20 credit cards with the lowest APR range from 6.4 per cent to 12.9 per cent.
APR is compounded interest month on month. It's easy for it to spiral out of control, which is why its key to get rid of the debts sooner rather than later.
If you're already paying off the maximum you can afford then transferring the debts onto a 0 per cent credit card can help bring down the costs.
How to cut the cost of your debt
IF you're owe a lot of money, it can be really frightening. Follow these tips to take action and start dealing with your debts.
- Don't bury your head in the sand - Check your bank balance at least once a week. Understanding how you spend is the first step towards managing your finances.
- Start budgeting - write down your weekly income then deduct essential bills such as food, energy, commuting and council tax.
Whatever is leftover is your budget for the month. Set aside a chunk to pay down your debts and work out what you'll spend and save. - Cut costs - look at ways you can cut your expenditure such as switching energy provider or swapping from named brands to supermarket essential options.
- Overpay your debts - The more you pay off the less interest you'll pay over time. This is espeically through for credit card debts. With loans or mortgages check first as there may be a mximum you can overpay.
- Prioritise - Things like rent or mortgages, council tax and energy bills may have serious consequences if you miss the payments.If you can afford to overpay, make sure you target the highest interest rates first.
- Get advice - If you can't afford what you owe - don't panic, there's plenty of free help available!
Contact debt charity Stepchange, Citizens Advice or the National Debt helpline where experts can talk you through your options.
You can also get help to prioritise debts and negotiate with creditors to set up affordable payment plans.
A 0 per cent balance transfer credit card stops you accruing interest on your repayments letting you clear your outstanding debts quicker - and saving you cash.
We asked to crunch the numbers to find out how much you can save by transferring your Christmas debts onto the current top-rate , fee-free, 0 per cent balance transfer credit card.
We looked at the rates of store cards from Very, Outfit, Next, New Look and Debenhams, and worked how much you could save if your debts were switched onto one with Santander, which offers up to 27 months interest free and charges nothing for the switch.
You would also need to be paying off £20 a month minimum.
Very charges a staggering 34.9 per cent APR, which means that they biggest savings can be had by those that switch away from their store card.
Best 0 per cent balance transfer cards
TRANSFERING your debts onto a 0 per cent credit card means you can stop accruing interest which will help you pay off the debts and save you cash in the long-run.
But before taking one out, shop around for the best deals, because the longer terms often come with a transfer fee.
And remember, only the best rates will be offered to those with top credit scores.
Top no-fee cards
Santander Everyday Credit Card, 27 months interest free
- Transfer fee: No fee within first 27 months
- Cost of transferring £1,000 balance: £0
- Monthly payment to clear £1,000 balance over term: £37.04
- Balance transfer after interest free period: 18.9 per cent
Sainsbury's Bank, 25 months interest free
- Transfer fee: No fee in first 22 months
- Cost of transferring £1,000 balance: £0
- Monthly payment to clear £1,000 balance over term: £40
- Balance transfer after interest free period: 19.9 per cent
Longest interest free cards
HSBC, 32 months interest free
- Transfer fee: 1.4 per cent
- Cost of transferring £1,000 balance: £14
- Monthly payment to clear £1,000 balance over term: £31.25
- Balance transfer after interest free period: 21.9 per cent
Post Office, 32 months interest free
- Transfer fee: 2 per cent
- Cost of transferring £1,000 balance: £20
- Monthly payment to clear £1,000 balance over term: £31.25
- Balance transfer after interest free period: 19.9 per cent
Customers with £500 on their card could save £300 in total, while those with £200 will save £33 in interest.
Outfit, managed by Topshop, Burton and Dorothy Perkins owners Arcadia, charges 29.9 per cent APR, meaning that shoppers with £500 on their card will save £235 by switching.
New Look customers are also better off avoiding being hit by the 28.9 per cent APR charges and instead transferring their balance.
Customers with £200 debt can save £27 on interest, while those who owe bigger sums of cash - £500 - can save £223 over all.
Of course, it's important to remember that some lenders charge a fee for transferring your debt so it's worth taking that into account when applying.
Plus, providers only have to offer the advertised rates to 52 per cent of applicants so the best rates will be offered to those with the best credit scores.
It's also worth checking whether you're likely to be accepted for a credit card using a free online legibility checker. A rejection can seriously damage your credit score.
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Hannah Maundrell from Money.co.uk said: "If you’re being charged interest on your store cards, a balance transfer could help you get a lower interest rate, or give you a break from being charged interest full stop for a set period by moving what you owe to a new card.
"When looking for the right card, work out how long you need to pay off, what you owe and try to find a card with a 0 per cent period that gives you enough time to repay with the lowest fee you can get.
"Remember, if you still have an outstanding balance at the end of the 0 per cent period, the representative APR will apply and you’ll start being charged interest on what you owe again."
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