Martin Lewis says ‘golden’ bank card rule is ‘price doing’ to clear debt

Struggling with bank card debt?

It can unattainable to repay your totally different playing cards at occasions – however Martin Lewis has shared a “golden rule” he follows. The trick is to search for accounts with no or decrease rates of interest.

You can then use these as “balance transfer” playing cards, which aid you to repay your month-to-month stability with out accruing extra curiosity.

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On Tuesday’s episode of ITV’s The Martin Lewis Money Show, the buyer skilled defined: “The key weapon in case you have bank card debt is a stability switch. People do get confused, so let me simply take this again to fundamentals. Imagine you have received two not-very-nice playing cards.

“The golden rule here is that if you cannot afford to clear your credit card or your debt in full and you’re paying interest, you cannot afford not to check for a 0% balance transfer. I’m not saying you will get one, I’m saying you should absolutely check.”

He used an instance of getting two bank cards, one with a 19.9% APR and one other with a 21.9% APR. One has £700 debt, the opposite has £1,100 debt.

According to Birmingham Live, Martin continued: “You need something to sort you out, so you apply for [a balance transfer card] at 0% for two years with a £2,000 credit limit.

“This is what happens. You ask the [balance transfer card] to do a balance transfer. In practice, it then pays off the debts on the other cards for you. So those debts are gone. Those cards are now empty. Instead, you owe [the balance transfer] card the £1,834.

“But now, instead of an average rate of around 20% a year, you’re not paying any interest on it at all, and the practical point on that is pretty simple. All of your repayments towards the card are clearing what you actually owe, rather than just servicing the interest and going towards the profit of the credit card company.

“That is a balanced transfer in a nutshell. There’s a one-off balance transfer fee that you pay a percentage of the debt you shift. So let’s say it’s a 3% fee – that’s £30 you pay for every £1,000 you shift.

“Fees have got a bit bigger. You’re not going to get the best deals anymore. But it’s still absolutely worth doing and the hope is, if interest rates do drop during this year, as predictions are now moving towards it, these may get a little better in six months.

“But if you’re paying interest on your debt, you shouldn’t wait for this to get on with it.”