Blitz Your Debts In One Easy Step

Szu Ping Chan explains the easy way to clear your debts.

This article has already been emailed to readers as an 'Afternoon' email.

Ordinarily, you'd think an article which talks about Christmas in February would be one of two things: extremely late, or obscenely early.

However, as we file away yet another season of mince pies and mayhem, for some of us at least, the debts of Christmas past are still hanging over us.

According to a poll by Abbey, despite many Brits making it their New Year's resolution to transfer credit card debts to a 0% deal in January, two thirds have failed to follow it through.

Half of those surveyed said they'd used a credit card over the Christmas period, and while 55% cleared their Christmas card debt in full after receiving their January statement - of those who didn't, half had paid off less than a third of what they owed.

Transfer, transfer, transfer!

Credit card debts often walk a fine line between being manageable and spiraling out of control. That's why it's extremely important to make sure you're firmly in the driving seat when it comes to dealing with debt.

One way to do this is to stick to that New Year's resolution and transfer those toxic debts onto a 0% credit card. The current market leader in this department is the Virgin Money MasterCard, which offers 0% on balance transfers until June 2010 (a 2.98% fee applies).

I must confess that lately it seems every other credit card article we write features Virgin's credit card, and you could be forgiven for letting your eyes glaze over each time you read them.

However, at 16 months interest free, this market leading card really does give you the breathing space you need to sort your debts out and get rid of that 2008 hangover for good.

If you're still not convinced, perhaps I should let the numbers do the talking...

Doing the maths

Using a credit card calculator, I worked out that if you had £2,000 of debt on a credit card with an APR of 18.9% and only paid the minimum payment of 2% each month, 16 months later in June 2010, you would still have £1,859.13 outstanding.

If on the other hand you'd transferred those debts to the Virgin credit card, you'd owe £1,507.20 - a £351.93 saving (including all balance transfer fees). What's more, if you can afford an extra £100, by the time June 2010 arrives, you'll be completely debt free.

If you want more tips on dealing with debt, together with ways to find that extra £100 a month, read Serena Cowdy's handy article on destroying your debts in five steps.

And, for sceptics wanting to know more about how good the Virgin card really is, Serena also presents the case for the prosecution and defence in Is This Really The Best Credit Card On The Market?

No matter which card you choose, at the end of the day, you should treat your 0% credit card in the same way you'd treat an interest only mortgage, and try to set up a separate repayment vehicle to ensure the whole debt is paid off before the introductory term ends.

Once the hard work of making the transfer is done, it's all too easy to sit back and let the minimum payments trickle out of your account. Of course, not everyone will be able to pay their debts off in 16 months, but as one supermarket says, every little helps.

Good luck, and start clicking now!

Switch to a cheaper credit card today!