How to cure your festive spending hangover

Get ready to tackle those festive debts

MILLIONS of households will hear that sickening thud on their door mat or a groan from their email inbox as credit card bills land.

Then they’re hit with the reality that all they’ve been left with after the festive season is a financial hangover.

Credit card debt reached an eyewatering £72.5billion in November, and that’s before more was piled onto plastic in December to cover Christmas gift buying.

So it’s time to take action and control of your finances.

Don’t ignore things and let them spiral out of control or you could end up hit with hefty interest and charges, or falling deeper into debt and struggling to get out of the red.

Gareth Shaw, head of money at Which? says: “Dealing with credit card bills and debt that has racked up over the festive season can be a daunting prospect, and it may seem easier to ignore the problem.

“However, don’t be put off by a debt hangover after the Christmas spending excess – this is the time to get on top of your finances, as tackling them sooner rather than later will put you in a stronger financial position for the rest of the year.”

Here are six ways to tackle your debt and get your finances back on track:

1 PAY A BIT EXTRA OFF EACH MONTH

If you owe £1,500 on a card charging the typical 18.9% APR, and pay just the minimum repayment each month, you will be trapped in debt for 15 years and eight months and get hit with £1,316 in interest.

Pushing your repayments up by just £10 extra a month can make a huge difference to the length of time it takes to get the balance cleared – just take a look at the numbers:

Pay an extra £10 a month – you’ll be debt free in six years and four months and pay £684 interest

Pay an extra £20 a month – you’ll be debt free in four years and two months and pay £481 interest

Pay an extra £50 a month – you’ll be debt free in two years and two months and pay £261 interest.

2 SWITCH TO A 0% DEAL

If you are paying interest on your credit card debt, consider getting a 0% balance transfer deal. This in effect freezes the interest you pay over the term, which can be up to 32 months, and lets you focus on paying down the debt. There is usually a one-off transfer fee, typically around 3% of your balance. But everything else you repay above this goes towards clearing your balance.

Make sure you only use the card to clear a balance, don’t spend on it and build up more debt.

Which? tip: Only take out a balance transfer card for the length of time you need to repay the debt. Often the shorter the term, the lower the fee, and some come fee-free. If you have a smaller debt, Nationwide’s Select card may be worth considering at 0% for 12 months and 0% balance transfer fee.

3 TAKE OUT A STRUCTURED LOAN

If you don’t feel you can be strict enough to ensure you get your credit card debt cleared and worry you might be tempted to spend on the card, then think about a personal loan. You will have regular monthly repayments and a fixed term. There are deals from as low as 2.8%.

4 USE A MONEY TRANSFER CARD

If you’ve dipped into the red with an overdraft, you could be paying dearly.

Unarranged overdrafts can cost 7.5 times more than a payday loan, according to Which? research.

It can be difficult to get out of an overdraft spiral as charges and fees eat into your income each month and leave you short of cash to cover all your bills. If you are struggling to get out of the red you could use a 0% money transfer card. These allow you to move cash into your bank account. Try: HSBC offers 32 months with a 1.4% fee, and Virgin Money has 20 months/4% fee.

5 MAKE SOME EXTRA CASH

If your budget is already stretched see if you can turn some of that clutter into cash. After Christmas it can be hard to find a new home for presents, so it’s a good time to see if there are items collecting dust that could be put to much better use, raising money to clear expensive debt.

It’s a bit chilly for a car boot sale perhaps, but there are lots of websites and apps you can use to offload your excess and unwanted items.

Try: eBay.co.uk and gumtree.com for almost anything, amazon.co.uk for books and musicmagpie.co.uk for CDs, DVDs and games, clothes and electronics.

Pushing up repayments by just £10 a month will clear the bill far quicker

6 LOYALTY DOESN’T PAY

While you are tackling debt it’s the perfect time to take stock of all of your financial products – insurances, mortgage, current account, energy – to make sure you really are on the best deals and not paying more than you need to.

Remaining loyal and simply renewing contracts each year means you will be paying over the odds. Research from debt charity Citizens Advice found households were paying an average £877 extra per year for sticking with existing suppliers. It looked at broadband, mobile phones, home insurance, mortgages and savings.

Figures from GoCompare.com show drivers can save an average of £268 if they switch insurers when their car cover is up for renewal.

Tackle one bill at a time and watch the savings add up.

It could help you to release more cash to be able to clear expensive debt a lot quicker – and a lot cheaper.