Debt Basics

One way for credit card holders who are struggling to pay off their balance to improve the situation is to switch provider.

Many credit card companies offer exceptionally low - or zero - interest rates on balance transfers. If you think you can pay off the debt within six months and the 0% offer applies for six months, it's an obvious step to take.

But for card holders who don't pay off the debt within that period the 0% rate will revert back to the normal rate. Once that initial 0% rate has gone, the increased monthly repayments can soon outweigh the apparent benefit of that initial introductory offer. Banks are supposed to warn you before the introductory rate stops, but stay alert.

Credit cards are an easy way to deny what you are spending. If you put your card behind the bar when you are out, there is a temptation not to worry about the bill you are running up; by the time you leave the bar, you may not be in a state to care!

When the credit card bill arrives, it is important to check it for errors and then pay the whole balance if you possibly can. Don't be tempted to only pay the minimum amount, as this is often only 3% of the total debt. Look at how much interest you have paid in the last year - think what else you could have done with that money. Remember that if your store card has an interest rate of 28.5%, over two and half years you will end up paying twice the original cost of the item.

Things to look for when choosing the right credit card:

1. No annual fees
2. Long grace periods between receiving the bill and having to pay
3. Bonuses, such as cash backs, free travel insurance, air-miles, insurance on purchases and points towards free gifts

If you do decide to apply for another card, you need to find out how much credit they will give you and how much monthly interest you will pay. Savvy credit card users will shop around for the best possible deal. Often those deals will last six months before reverting to a higher rate of interest, but it is possible to negotiate with the card issuer and extend the reduction.

Credit card issuers will also do deals from time to time, such as offering a low rate of interest on a balance transfer for as long as you keep it with them. This can result in a better deal than a personal loan. The important thing is making sure you are regularly paying off the card each month and avoid spending any more money.