
The point of this part of the process is to work out how to reduce the cost of your debt. That means you can then pay off your debt as quickly as possible with as minimal cost.
This isn’t just about doing a balance transfer to a lower rate and getting on with spending more! This is about taking the right steps to make sure you reduce the cost of your debt in the most efficient way for you.
Before we start I thought it was important to define what is meant by the term ‘the cost of debt’. This is effectively the interest you pay on your outstanding liabilities. Typically, credit card interest is the most expensive form of debt.
This is why it is crucial that we reduce the amount of interest that you pay (so that any repayments you make are chewing up that balance as fast as possible). A higher interest charge will rapidly build up your outstanding balance meaning that you will struggle to pay the balance off in full.
1. Check your credit score
Before you rush off to apply for a balance transfer card, make sure you check your credit score first. This is because incorrect information on your credit file can impact whether or not you will be accepted for a new credit card.
There is full advice on Money Saving Expert on how to do this.
2. Shift your balance to a new credit card
If you have a suitable credit score you can move your existing balance to a new card with a lower or zero interest rate. Before you do it check if your existing provider can offer you a decent deal.
If this is option is available to you, this means that any repayments you make will now be straight off your balance. This will help you to reduce your debt much faster.
Once you have moved your balance to the new card, make sure the old account is closed and your cards are destroyed. If you keep the account open, it will be too easy to fill it up again.
Make yourself aware of when the interest-free/low-interest period will expire so that you know in advance of when that balance needs to be fully paid off. Many of these introductory offers will switch to higher interest rates once the introductory period has expired.
It is important to remember that the point of this step is to reduce your debt and not increase it. Don’t undo all of your hard work by building up the balance on your credit card as fast as you pay it off.

3. Stay with your existing provider
If moving your balance elsewhere is not an option available to you, see what your current provider can offer you. Sometimes reducing your interest rate is enough to get you out of debt much faster.
If you have multiple cards make sure you get as much of your balance onto the cheapest interest rate possible.
4. Focus on the expensive debt
If you have multiple balances, you need to focus on the balances which have the most expensive interest rates first. This is because it is important to get that expensive debt off the list first.
In the meantime, you should continue to pay the minimum amount on the cheaper debt until the expensive debt is paid off. You then shift your focus to the cheaper debt and continue to pay it off as fast as possible.
5.Shop around for the best deals
January is a popular time for balance transfer card deals so make sure you get the best deal. As a result, you should have a look at price comparison sites will help you figure out which is the best deal for you.
Don’t forget to check Top Cashback to see if there any cashback sign up offers to take advantage of.
This article is the third in our series on How to Pay for Christmas in 2021. If you missed the first article you can read it here.
If you are struggling with debt in the UK you can contact Citizens Advice for free confidential advice.
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