Martin Lewis, the consumer champion, dedicated a significant portion of his ITV show this week to providing advice on how to reduce debt and find support if financial burdens are becoming unmanageable. He encouraged viewers not to ignore any bills or letters due this month, which may be higher than usual due to Christmas overspending.
The best way to reduce credit card debt, according to Martin, is to transfer your balance to a new card that offers a zero per cent interest rate. His key advice for those in debt is to minimise the amount of interest paid – typically around 25%, repay borrowed credit as quickly as possible, and seek advice from a non-profit organisation if the situation becomes too difficult to handle alone.
Martin’s primary solution for reducing the amount owed is a zero per cent balance transfer. However, he stressed the importance of using an online eligibility checker before signing up for anything, as this will have the least impact on your credit rating, reports the Daily Record.
It’s also essential to shop around for the balance transfer deal with the longest term, as this means you’ll only be repaying the money you owe and not any interest. This can often lead to a cycle of never-ending credit card debt, as the interest can be higher than the minimum monthly payment.
Writing in this week’s edition of the MoneySavingExpert’s newsletter Martin explained that a 0% balance transfer involves obtaining a new credit card to pay off existing debt, allowing individuals to owe the new card instead, but with no interest for a set period. This enables more of the payments to reduce the actual debt, leading to becoming debt-free quicker.
Rules for balance transfers
To assist everyone in making the best decisions, Martin shared his ‘golden rules’ for balance transfers.
Martin Lewis provided guidance on how to manage debt effectively with 0% balance transfer credit cards. He advised: “First, clear the debt, or at least balance transfer it again if you can, before 0% ends or you’ll pay that higher 25% APR. Second, never miss a minimum repayment each month if you do, you will often lose the 0% and you’ll be up 25% straight away – if you have bad personal admin, set up a Direct Debit to pay the minimum, that way you’ll never miss and then manually overpay each month.”
He also cautioned: “Number three, don’t spend or withdraw cash as it isn’t at the cheap rate on these cards.”
Regarding the timing of balance transfers, he suggested: “Number four, try and do the transfer when you apply, if you’re not ready to do it check how long you’ve got – it’s usually 60 to 90 days.”
Help with debt
For those struggling with debt, Martin emphasised the importance of seeking help and provided resources, including charities and organisations that can negotiate with creditors to arrange breathing space or payment holidays. For those in need of assistance with money, debt or accessing financial support, free, confidential and impartial advice is available:
- Step Change – 0800 1381111
- National Debtline – 0800 808 4000
You can also catch up with the Martin Lewis Money Show Live on the STV Player of ITVX.