Cap your credit card costs NOW

OVER 3million people are stuck in a longterm debt quagmire. Labour proposed capping credit card interest so you can’t be charged more than you were lent: so borrow £1,000 and the most you’d repay is £2,000. Good call – but will it ever be law? Don’t wait. If you have credit card debt I have five ways to cap costs NOW.

1 It takes two minutes to see if anyone will cut your interest. I’ve written many times about balance transfers, where you get a special new credit card deal to repay existing cards, so you still owe it but at 0% interest for up to 40 months.

Sounds good, but the challenge if you have ongoing debt is being accepted. Use a balance transfer eligibility calculator to see your odds of a deal. Mine is at mse.me/eligibilitycalculator.

Even if all you get is a year’s interest free the impact is huge. Many are put off applying if their acceptance chances are slim – say 20%. Yet it doesn’t mean rejection. Two in 10 in your position will be accepted. So go for it – you’ve little to lose by one application and the upside is huge.

As Kelly emailed: “Legend. Used eligibility calc, got 35mths 0% & shifted £11k from 29.9%. Shocked by savings.” I’m not surprised! If she clears the debt in 35months she’ll save £4,900 interest. 2 Use existing cards to move debt where it’s cheapest. I call it the credit card shuffle. In a nutshell, if you’ve two or more cards, check all their interest rates (APRs). Then aim to move the debt to where it’s cheapest. If your Ant card’s

18.9%, for example, but your Dec card’s 34.9% ask Ant card if you’ve any room on your credit limit and if so shift the debt from Dec so it’s cheaper.

If asked, some providers – including Barclaycard and MBNA – have special existing customer deals, so you shift debt to the card at less than the standard rate. 3 Snowball to clear the highest APR debt first. Snowballing is a technique which lets you get debt free more quickly.

Once all your cards are at the lowest possible interest rate, focus all spare cash at clearing the one with the highest APR first, as it’s costliest and is growing fastest. Repay the minimum on the rest. Clear it, then focus on the 2nd highest, and so on. 4 Only got one card? Beware minimum repayments. These are commercial genius. As they only just cover interest, you hardly ever pay anything off, leaving you near perpetually in debt, accruing more interest for years.

Borrow £3,000 at a typical 17.9% and make minimum repayments and it can take 27 years to clear at an interest cost of £4,000. Use the minimum repayment calculator at mse.me/minrepay to see how long yours will take.

Yet there’s a trick here too. Minimum repayment in month one is £70, so if you fix your repayments at this every month (rather than minimum repayments which reduce as you owe less) then you clear it in seven years costing £1,500 in interest. 5 Can’t sleep due to debt? If you struggle to meet even the minimum repayments or your non-mortgage debts are more than a year’s after-tax income then you are likely in debt crisis.

A free one-on-one debt counselling charity like citizensadvice.org.uk,

stepchange.org or nationaldebtline.org will help – without judging you – and can put you in a debt management plan to relieve the pressure.

If you’re also struggling emotionally capuk.org combines debt and general counselling.

The most common thing I hear from people after they use them is: “I finally slept last night”.

See also my free Mental Health & Debt Help booklet at mse.me/mentalhealth.