MANY of us will have vowed to get on top of our finances when we made our New Year’s resolutions two days ago.
If you have drifted into the red or are struggling to keep up with credit card payments, then getting on top of your finances could be a good place to start.
We explain the best credit cards and loans to help you manage your money[/caption]
Here we explain how to find the best credit cards, loans and balance transfer cards to help you shift your debt this year.
Plus, we reveal whether you would be better off with a loan and how to apply for one.
Top credit cards to help manage your money
If you spent too much over the festive period, then there are several types of credit card that could help you get back on track.
If you have multiple credit cards and want to move all of your debt onto a single one then a balance transfer is a good option.
These cards usually have a low interest rate for a set period, which can help you pay off your balance faster.
Or if you need to spread the cost of a big item then a purchase card can help.
Purchase cards usually have an interest-free period, which can make them a cheaper way to borrow.
Meanwhile, if you have a low credit score then a credit builder card could help you to show lenders that you are reliable.
This can mean you get offered better credit cards in the future.
Which cards you can apply for will depend on how much you can afford, why you want one and your credit score.
Always think about what you want to use a credit card for before you apply to make sure you get the best deal.
Every application will leave a permanent mark on your credit report so think carefully about whether a card is right for you before you apply.
You can compare credit card deals on comparison sites such as Moneysupermarket.com and moneyfactscompare.co.uk.
How to boost your credit score
Your credit score gives an overall picture of how responsible you are with money.
The score shows lenders whether you’ve been a reliable borrower in the past.
If you’ve never used credit before you may have a low credit score and struggle to get accepted for credit.
To boost your credit score, show lenders you are a stable, reliable individual by registering to vote.
Being on the electoral roll confirms your address to lenders so can significantly boost your credit score – it can add 50 points, according to Experian.
Get a copy of your credit report – you can get one for free from Experian, Equifax or TransUnion – and check it for mistakes.
Make sure your personal details are correct and that any missed payments or black marks on your file are correct.
If there are mistakes, ask the financial firm involved to correct them or ask for a note to be put on your file explaining them.
Finally, consider getting a credit builder credit card.
These are designed for people with poor or limited credit histories.
This means you are more likely to be accepted but the interest rate may be higher and the credit limit lower than on mainstream cards.
Some of these cards come with rewards too.
These websites will also tell you if you are likely to be accepted for a credit card before you apply.
This can help you avoid being rejected, which can damage your credit rating.
Best balance transfer cards
Balance transfer cards are one of the most effective ways to pay off debt.
They work by allowing you to move any money you owe from one credit card to another that charges less interest.
If you are accepted for one of these cards then your new provider will arrange to transfer the balance from your old credit card to your new one.
There is usually a small fee to switch to these cards, which is typically between 1% and 4% of the amount you are moving across.
Usually, they have an introductory period where you pay no interest for a set number of months.
When this ends the interest automatically goes back to the standard rate, which is usually around 25% APR.
The 0% period means you can use the money you have saved in interest to pay back your balance faster.
You should aim to pay off your balance within the 0% period or you may need to move it again to avoid high interest charges.
To figure out if you can do this you should calculate how much you can afford to repay each month.
Next, divide the debt by your monthly repayment figure to work out how many months it will take to repay it in full.
If you cannot afford to do this you still need to make the minimum payment each month.
Andrew Hagger, founder of financial website Moneycomms, warns that you can be hit with high penalty fees if you do not keep up with your payments.
He said: “If you don’t make your payment on time (as per the date shown on your card statement), you could lose your 0% rate and be charged a late payment or missed payment fee of £12.”
Borrowers who want the longest 0% interest-free balance transfer period should apply for the Barclaycard Platinum Balance Transfer card.
The card gives you 30 months interest-free and has a 3.45% transfer fee.
Meanwhile, the HSBC Balance Transfer Credit card also gives you 30 months interest-free for a 3.49% fee.
If you think you can pay off your balance in a shorter period then Barclays and NatWest offer cards with a 12-month interest-free term and no balance transfer fee.
Manage payments with a purchase card
A purchase credit card lets you make payments without paying any interest for a set period of time.
This can be helpful if you need to buy something expensive as you can spread the payment over an interest-free period.
Rachel Springall, personal finance expert at Moneyfactsompare.co.uk, said: “Knowing when to buy a big-ticket item can be unpredictable.
“But if someone typically buys expensive goods this time of year, then it’s wise to get a 0% purchase offer in readiness.”
You need to meet the terms and minimum payments every month to keep the 0% rate.
If you do not pay off your balance by the end of the 0% period then interest will build up on your balance.
This will make the remaining payments more expensive.
The amount of credit you can borrow and the interest-free period you get will vary depending on your finances.
Barclaycard also offers the longest purchase card and gives you up to 22 months interest-free with its Platinum card.
It has an interest rate of 24.9% on balances once this period ends.
Or HSBC Purchase Plus Credit Card offers 20 months of interest-free purchases and has the same APR.
Improve your score with a credit builder
Credit builder cards can help you build your credit history or get your rating back if you have been refused credit.
If you have a low credit score or a poor credit history then the cards can help you demonstrate to lenders that you are trustworthy.
To begin with, they usually have a low credit limit and high interest rate.
Lenders do this to reduce the risk that they lose money if you can’t pay them back.
If you make your repayments on time and in full your credit score should improve and you can increase your credit limit.
Rachel Springall said: “Providers look more favourably on consumers who can prove they are sensible with any debts, but no one is guaranteed to get the top deals.
“This makes it essential to shop around but be conscious not to run too many credit checks.”
The Virgin Money Credit Builder card has the lowest interest rate on the market, at 23.9%.
It has a maximum credit limit of £3,500, which depends on your financial situation.
Meanwhile, the Barclaycard Forward Credit Card has an interest rate of 33.9%.
Customers can borrow between £50 to £1,200 on the card.
Consider a loan
In some cases, it could be better to get a loan to pay off your credit card debt.
This can be the case if the amount of time you will need to repay the balance is longer than the interest-free period you could get with a credit card.
The interest rate of a loan is usually lower than that of a credit card once the interest-free period ends.
A loan also removes the temptation to spend a credit card, which could be good if you are worried you could be tempted.
Before applying for a loan you should do some calculations to assess which option is best for you.
Make sure you can afford to keep up with the monthly repayments before you apply.
For those who want to borrow £5,000, Santander offers the cheapest loan.
It has an interest rate of 7.2% and the total cost of credit would be £555.52.
Tesco Clubcard customers can get an exclusive rate with its loan.
The Tesco Bank Clubcard Personal Loan has an interest rate of 7.2% but this falls to 6.1% for members.
Meanwhile, existing First Direct customers can borrow the same amount with an interest rate of 7.4%.
If you decide to take out a loan then you should close the original credit card where you built up your debt so you do not get tempted to spend on it.
If you are struggling with debt then you can get help from charities and groups including:
- Citizens Advice – 0800 240 4420
- StepChange – 0800 138 1111
- National Debtline – 0808 808 4000
Free cash schemes if you’re struggling
Many of us are still struggling with the high cost of living – but there’s help you can get.
New or expectant parents can get up to £442 a year to spend on food through Healthy Start scheme.
Some new parents can get £500 via the Sure Start Maternity Grant. The money is designed to help you cover the costs of having a child.
Councils also offer support through the welfare assistance schemes, to help cover the costs of essentials, from buying new furniture to food vouchers.
The amount you can get varies but an investigation by The Sun found that hard-up Brits can apply for help worth up to £1,000.
Discretionary Housing Payment is a pot of money handed out by councils to those struggling to keep a roof over their heads.
A scheme is available for those who find themselves unable to cover housing costs, though the exact amount varies as each local authority dishes out the cash on a case-by-case basis.
Many energy forms offer grants to help cash-tight customers. The exact amount varies depending on your supplier and you circumstances, but could be as much a £2,000.
Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.
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