The pressure to spend more during the holiday season can see the finances of many Britons stretched to the limit. Many may have tapped into their overdrafts as they struggle to afford the extra luxuries often expected during the Christmas season. Express.co.uk spoke with an expert to find the best ways to help you sort out your finances as 2022 approaches.
Analyze the additional funds you may have
Aseem Munshi, founder of the financial app Updraft, told Express.co.uk that if you have savings or have funds available in your checking account, you can use them to write off your debt.
He said, “This is because the interest rate you pay on your credit card is likely to be higher than any interest you make on your savings.
If you don’t have any savings, he recommended that Brits look at their budgets to see where they could be saving money.
These savings can then help you reduce your credit card borrowing.
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Balance transfer cards can also be used to help you manage your debt.
These cards usually charge very low or zero interest rates on the debt transferred for a set period of time. Usually it can be up to a year.
This gives you time to pay off what you owe the bank without accruing interest.
But make sure you make regular repayments or you risk getting into more debt.
Not all credit card debt is bad
While being in debt is never a good thing, if you use your overdraft responsibly, you could increase your credit score, which could help you in the future.
Mr. Munshi said, “Not all credit card debt is bad.
“Having a history of being able to handle loans is good for your credit score, which is important for things like getting a mortgage.
“Credit cards also offer protections on certain purchases you make if a retailer goes into administrative proceedings or if the item you buy is defective – all good things.”
But he urges Britons to use credit cards with caution and make sure they pay off their overdrafts every month.
Credit card loans can easily add up because they often have high interest rates.
This means that having your credit card overdraft can be a very expensive form of borrowing.
If you don’t have a steady monthly income or have been in debt in the past, you may be better off avoiding using credit cards.
Opt for debit cards instead, as you won’t be tempted to borrow money that you may not be able to pay back on time.