January is meant to be the most depressing month because it’s cold and we are all broke. But if you’ve got a debt on your credit card after splurging on Christmas, what should you do? I have a few hundred pounds on my credit card most of it spent on our trip to Edinburgh last month. I’m hoping that I can pay it off from income but if I can’t, then I will dip into the savings. This is not ideal - eventually the savings will run out if I carry on doing it - but it’s better than having a massive credit card debt.
Scarily, according to Sainsbury’s Bank Credit Cards there are 3.1 million people who still have debts dating back to Christmas 2017. And it says that while most people have their debt on one credit or store card, 28% have debts on two or more cards. Juggling debt like that must be a nightmare. Getting some help if you are seriously in debt is a good idea. StepChange Debt Charity is one of the free services those in debt can turn to. Its research says that more than a quarter of those surveyed started the year uneasy about their finances and two thirds of those have felt like this for more than a year.
If you aren’t so deep in the red you need help sorting it out but you still have a debt that is worrying you then what should you do? Firstly, make sure your debt doesn’t grow bigger. Hide your credit card. Get cash out from your current account when you go shopping: this will limit your spending. Take a calculator with you if you can’t keep a rough tally in your head. Cut back on things. One way I’ve managed to keep my credit card debt under control is going without. I wanted to get a new television in the sales but didn’t. There will be sales again in a few months if I still want one and our old one is still working, after all.
You also need to make sure that even if you aren’t putting new spending on your credit card, the outstanding debt doesn’t grow thanks to accrued interest. The standard APR on a credit card is around 18-20%. If you only pay the minimum back every month then the interest will mount up at a horrifying rate. There’s a great worked example here which shows how long your credit card debt will take to pay off and how much interest you’ll accrue if you only pay back the minimum required. So pay back as much as you reasonably can every month.
It’s a good idea if you have a reasonably large credit card debt to move it to a 0% balance transfer card. Try a comparison site such as Comparethemarket* or Uswitch* for the best deals. Currently you can get up to 32 months for 0% interest on balance transfers. However, you will pay a fee of about 2% to move a debt to a balance transfer card. And if your credit record isn’t great you may not be offered one of these deals. In addition, 0% interest balance transfer deals only work if you use that period to pay off the debt. Be realistic as to how long it will take you. The Sainsbury’s research found that most borrowers believe it will take 12 months on average to clear a debt. Yet as its research shows, many are still paying off 2017’s Christmas spending.
And finally, how depressing is January really? The snowdrops are coming out and the daffodils aren’t far behind. It will soon be spring.
See our guide to dealing with debt here.