The bank holiday has provided lots of opportunities, including plenty of reasons to spend. If you've over-indulged in the last few days, read on for our finance expert's well-researched tips for getting your credit card and overdraft debt back in check.
Rachel Springall, the aforementioned expert, suggests that now may be the perfect time to steel yourself and take a look at your spending. "If customers look at their credit card or bank balance now and make a solid plan to tackle their debts, they could save themselves some much-needed cash from unnecessary interest charges or fees," she said.
Luckily, there are plenty of interest-free deals on credit cards that can help you get back on track, as well as some low-rate loans that may be your best bet to consolidate debts. And don't forget about money transfer credit cards, which can allow people to credit their bank account and shift their debt to a 0% interest deal, for instance.
|Current deal||Spending and costs||Switching to a better deal||Savings|
|Warehouse store card charging 29.9% APR on purchases||£100 spend = £34 in interest||0% purchase card with Halifax for 30 months||£34|
|NatWest Reward Silver debit card (2.00% transaction fee and 2.75% conversion fee on foreign cash withdrawals)||£250 cash withdrawal abroad = £11.88 in fees||Nationwide FlexPlus Account debit credit (free to use abroad)||£11.88*|
|HSBC Credit Card (2.99% foreign usage fee and 2.99% cash withdrawal fee)||£250 cash withdrawal abroad = £14.95 in fees||Santander Zero Credit Card (free to use abroad)||£14.95|
|Personal loan (based on average loan rate)||£5,000 loan over 3 years at 7.4% = £571.08 in interest||£5,000 loan over 3 years with Admiral at 3.3% (costs £254.56 in interest)||£316.52|
|Santander Everyday Current Account||£300 arranged overdraft for 15 days = £15 in fees||first direct 1st Account (£0.33 in fees)||£14.67|
|Source: moneyfacts.co.uk. Credit card repayment is based on minimum repayment £5, or 5% assuming no other portion of balance is cleared. *NatWest charges an account fee of £12pm and Nationwide charges £13pm.|
The above table shows some other ways in which people can save money. As you can see, store cards can be quite the gamble, especially if you fail to pay it off quickly. "Based on an interest rate of 29.9% APR, a simple £100 purchase could take over two years to pay off and cost £34 in interest," Rachel stated. "It would make more sense for shoppers to use a 0% introductory purchase card, and with 44% of these cards interest-free for 12 months or more, there is plenty of choice to spread the cost."
Similarly, holidaymakers may want to use plastic abroad as it offers theft protection, but transaction fees could make this a lot costlier. As Rachel explains: "a typical debit card charges £11.88 when consumers withdraw £250 in cash abroad, while some credit cards can charge as much as £14.95 before interest is applied. It would make much more sense for travellers to take out a fee-free credit card to use abroad," with the top travel credit card deals currently offered by Creation, Santander and Halifax.
Regardless of what card you choose to spend on, whether reward, cashback or travel, the golden rule is "to pay off any balance before interest applies." This way, you can keep your spending interest in check, and maybe even get something back for your shopping.
With the extra time spent at home, you may have identified some much-needed improvements around the house. While the most sensible way to pay for these expenses is always to save up, we know this isn't always possible. Luckily, as Rachel points out, interest rates on loans are incredibly competitive right now.
"It would be a good idea to revisit any older loans as well, as the average loan rate on £5,000 over three years was 11.2% back in 2013, but now it's just 7.4% and the lowest rate is just 3.3%," Rachel stated. "It's important to keep in mind that out of all successful applicants, a minimum of 51% are offered the advertised rate, and if customers do switch their loan, watch out for early repayment charges."
To improve your chances of being in that coveted 51%, make sure your credit score is as good as it can be. Then have a look at the top personal loans currently available to see if they're a viable option for you.
Another top tip from Rachel is to make sure your current account is providing you with what you need. If you're someone who regularly dips into the red, you'll want to make sure you have the best deal for this. Rachel explains: "If customers were in the red by £300 for 15 days with the Santander Everyday Current Account, it would cost them £15 in charges. If they instead had a 1st Account with first direct, they would have only paid £0.33 in fees."
Even for those without overdrafts to worry about, switching accounts can be quite lucrative, as certain banks are offering cashback for new customers, as long as you close your old account. You can find the top high interest accounts currently available in their Best Buy chart.
Rachel concludes: "Even if a splurge cannot be avoided, there are clearly tonnes of ways for people to save themselves a lot of cash after an expensive extended weekend, but preparation is key to find the right finance deal so customers can take advantage of the abundance of tantalising offers."
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.