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Five minute finance: Paying down debt

Five minute finance: Paying down debt

Category: Credit cards

Updated: 31/08/2010
First Published: 31/08/2010

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date. research shows that even though we are currently experiencing the lowest Bank base rate in history, the average personal loan rate is 12.6% and the average overdraft rate is 14.12%.

When interest rates are as high as this, a prudent action would be to try and reduce outstanding debt, as well as find a cheaper form of finance at the same time.

Credit cards are a convenient way of managing your finances and paying for expenses on a day to day basis. If used correctly and the outstanding balance is cleared monthly, credit cards can be a free form of short term finance.

MBNA has recently introduced a great option for people who are looking to reduce their debts.

Remember that credit cards do not have an automatic repayment mechanism and try to not fall into the trap of reusing an overdraft facility to its limit shortly after existing debt has been moved elsewhere.

MBNA offers a zero transfer fee card

MBNA has introduced a new credit card that has no handling fee on balance transfers or money transfers made within the first 90 days of the account being opened. An introductory rate of 1.9% for 12 months is on offer and the standard rate of interest for card purchases is 16.9%. The account is set up with paperless statements only and these must be accessed via online banking.

AA extends intro to one year

Both the AA Credit Card Visa and Members Credit Card Visa now have an introductory rate of 0% on purchases for 12 months, previously 0% for 10 months. However, the introductory balance transfer rate has been reduced to 0% for 9 months, previously 0% for 12 months. Standard purchases are charged at 18.9% APR and the card holder can earn AA Reward Points on purchases.

Samantha Owens, banking and economic insight expert at, commented: "Whilst the balance transfer deal has been reduced, the increase on the 0% purchase term has moved this card just behind the market leaders. The value as a card for purchases is also enhanced with the rewards scheme."

Tie in to top rates

The new Combination Bond from Cheshire Building Society is offering a rate of 3.75% for a one year commitment. Savers can invest a minimum of £3,000 into the bond, but to qualify for the account savers must invest at least an equal amount into a Protected Equity Bond. For savers after a regular income a monthly interest option is available.

Samantha Owens, banking and economic insight expert at, commented:
This Combination Bond does pay a competitive rate for a one year bond but investors will need to ensure they can tie up equivalent funds for six years in an equity product and will need to check the terms and condition for this carefully or/and seek professional advise before investing.

Post Office opens its doors with a new online saver

The Post Office has expanded its range with the launch of a new online saver account offering one of the best easy access rates of 2.75% on interest paid annually. Easy access accounts are ideal for the portion of your savings pot allocated to cover incidental expenses, but customers must diarise the bonus rate's expiry date. This rate includes a bonus guarantee of 1.50% for the first 12 months and there is no limit on the number of withdrawals or the amount that can be withdrawn. A minimum investment of £1 and a maximum of £2M apply.

AA drives into best buys

The AA is offering new customers yet to invest this year's ISA allowance a rate of 2.70%, which includes a 1.00% bonus for 12 months. Savers can invest between £500 and £5,100 into the Internet Access ISA, which doesn't accept transfers in. No notice is required to access funds from the online operated account, but all transactions must be conducted via a nominated account.

Find the best savings rates for you - Compare savings accounts

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.