Practical ways to help beat debt including credit card switch and rule to follow

MoneyMagpie Editor and financial expert Vicky Parry explains steps you can take to get out of debt

Debt means different things to each individual.

Some might feel in debt if they have so much as a tenner on a credit card, while others have lived with a minus sign in front of their bank balance for countless years. Whatever amount of debt you have, it’s easy to find it scary and overwhelming – and so to ignore it in the hope it’ll go away. Top tip: it doesn’t! The good news is there are lots of practical steps you can take to tackle debt.

Get a clear picture of your debt

Before you try to get on top of debt, it’s important to know exactly what you owe. Make a list of all credit cards, mortgage, loans, car finance, overdrafts and student loan amounts that you have outstanding right now.

Take off the amount you know you can pay off at the end of this month. The figure you’re left with is your total debt to pay off. Don’t panic if this seems an insurmountable number! Knowing where you need to start is important, and remember there is at least one large loan, like a mortgage or student loan, that is designed to be paid off over decades. If you prefer, take that loan out of the equation too – as long as you budget for the monthly payments.

Make a budget

Speaking of budgeting, that’s your next step! Time to make a budget. List everything you must spend each month – mortgage or rent, Council Tax, utilities, leasehold or management fees, insurance costs and similar. Then, take a look at what you need to spend each month – your commute costs and your food expenses.

The amount you have left over is what you have to spend between your ‘wants’ and your debt. A want is something like going out for dinner or having three drinks instead of one at the pub after work on Fridays.

Assess your debt costs

When deciding which debt to pay off first, look at how much each one is costing you. Generally, ones with the highest interest rates should be paid off first. That doesn’t mean don’t pay the rest! Split your money proportionately, so you’re paying the largest amount towards the biggest debt. This will reduce your interest payments faster.

For example, let’s say you have £500 to spend on debt each month. You have £600 on a credit card and £200 in your overdraft. While it might feel like paying off your overdraft and £300 towards your credit card will tackle debt faster, pay attention to the fees of the debts. Overdrafts often have a higher fee than a credit card, but a £200 debt at an overdraft rate of 39.94% would cost you £5.60 a month.

On a credit card, even a lower rate of the average 24% paid off at £300 a month (half the £600 debt) would cost £8.50 a month. So, you want to split your £500 proportionately to tackle each debt. In this scenario, paying £400 towards your credit card and £100 towards your overdraft would result in lower overall cost for each debt.

Switch to a balance transfer credit card

Of course, the above scenario could be improved further if you switch to a 0% balance transfer card will buy you some time on your repayments. Shifting your debt to a new card with an introductory offer on 0% balance transfer and 0% interest rate offer will reduce your overall payments.

The example on Barclaycard is this: moving £3,500 from a card that was costing 19.9% interest to a 28-month 0% balance transfer card will save you £1,299 in interest payments, with a monthly repayment of £95 a month.

Balance transfer cards are not always for continued spending, and the 0% limit is only for a specific time period, so make sure you will be able to repay in that time or set a reminder to shift to a new balance transfer card at the end of the term.

Cut back on treats for a couple of months

We’re not saying deprive yourself – everyone, no matter their financial circumstance, needs morale boosters. However, if you buy a takeaway coffee several times a week, at least invest in a reusable mug to get 50p off each coffee (so the mug pays for itself in just a couple of weeks). Or, restrict your takeaways to once a fortnight instead of weekly. And if you really love the M&S fancy biscuits – have them!

Make swaps elsewhere, such as going own brand wherever you can, to balance your spending and treats. Or, if your treat is subscriptions like Netflix, rotate services month by month so you’re not spending £60 a month on streaming services. If you have a gym membership that you only use for exercise classes, cancel it and go for walks or do your own bootcamp with a friend in the park.

It’s also a good opportunity to motivate yourself to cut down on bad habits – smoking, vaping, and drinking alcohol all very quickly eat into your household budget. A pack of 20 cigarettes is over £14, so even a couple of packs a week adds up to over £100 a month. Cutting down or quitting totally will significantly increase your spare cash each month.

Have a ‘no new clothes’ rule

Sort through your wardrobe – you might even be able to make some extra cash from unwanted or vintage clothes! More than that, it’s easy to rediscover items you’d forgotten about and love to wear. Tell yourself that you won’t buy new clothes every time there’s an opportunity to go out, or see friends, or just because. The only time you’re allowed to buy new clothes is if it’s totally essential, such as new underwear because all of yours have holes in!

Speak to a debt specialist

If you feel there is simply too much debt to tackle, there are free services that can help you break down your repayments into manageable amounts. They’ll also handle the paperwork for you, often organising interest freezes with your credit card company to stop the fees piling up while you’re working on a repayment plan.

Stepchange and National Debtline are both free services for customers to use. Don’t pay someone to help with debt – these two organisations are legitimate and recognised services that are free because they are charities, and they have established processes with financial providers to help you get out of debt.

Speak to a therapist if overspending is a problem

Spending money when it feels like you don’t have any seems counterintuitive, but think about why you’re in debt. Sometimes, life just happens and there are too many bills and not enough salary each month. However, spending can also be a sign of deeper problems like depression, and even a symptom of an addiction itself.

If you just can’t seem to help yourself to spending excessively even when you know you can’t afford it, there are ways to get help. BetterHelp is a great online therapy service, but there are also other ways to access mental health support for free or in person too.

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