Archive: MoneySavingExpert's Money Tips Email

Martin's January Debt-Buster Masterclass
Cut the cost of existing credit cards, overdrafts, loans & more, sometimes to 0% (even without the best credit history)
New. Best debt-shifting deals since 2018...

For the millions dreading the flip-flapping of Christmas credit card and other bills through the (virtual) letterbox this month... there's a little good news. Recent UK base rate cuts mean the current longest 0% debt switch beats any on offer since 2018, with up to 38mths interest free available.

So, as it's a good time to cut debt costs - especially as soonest dealt with is soonest mended (or at least improved) - here's my annual January Debt-Buster! If you owe money, the key rules are reduce the interest, repay as quickly as possible, and try not to borrow more. Though if you're panicked about debt, and it's all too much, jump straight to debt crisis help. In this Masterclass I'll go through...

1. Switch Credit Card Debt to 0% til 2029 (incl poorer credit scorer deals)
2. Cut hideous 40% Overdrafts (which sadly is most of them) to 0%
3. Cut the cost of Existing loans
4. Is it worth Consolidating card debts on to a loan?
5. Help if struggling with Buy-Now-Pay-Later
6. Five fundamental Debt Fixes
7. Free debt crisis 1-on-1 Help

A 0% balance transfer is where you get a new credit card to pay off debt on your existing card(s), so you owe it instead, but with no interest cost for a set time. This way, more of your payments reduce the actual debt - getting you debt-free quicker (just don't borrow more). And deals right now are a touch better than any we've had for years...

• Apply via our eligibility calc to see who'll accept you. It shows which cards you'll most likely get, helping protect your credit score.
• Get the lowest one-off fee within a 0% long enough to clear the debt. If you're unsure, just play safe & go long.
• Usually rejected? MSE's free Credit Club (also via the Apple | Android MSE App) can analyse the problem (there's an eligibility calc there too).

There are special poorer credit score balance transfer 0% deals. If you've got a poor credit history and often get rejected, always try our balance transfer eligibility calc as it will show you which cards are most likely to accept you.

These currently include Capital One's definite 23mths 0% (2.9% fee) then 27.9% rep APR after, and Vanquis' definite 19mths 0% (3.48% fee) then 29.9% rep APR after. Neither exclude those with County Court Judgments, defaults, or cleared bankruptcies, but whether you'll be accepted or not depends on other factors too.

Do note the rep APR rate after the 0% ends is higher on poorer credit scorer cards than standard cards. So do compare that with your current card's APR. If that's lower, ONLY shift debt you're sure you can clear within the 0% time. If it's higher, shift the max allowed.

Quick balance transfer FAQs, full help in best balance transfers.
Q. Is it worth applying if my eligibility odds are low?
Q. What if my credit limit isn't big enough?
Q. Can I shift debt to existing cards too?

ALWAYS follow the Balance Transfer Golden Rules
a) Never miss the min monthly repayment, or you could lose the 0%.
b) Aim to clear the card before the 0% ends, or the rate rockets.
c) Don't spend or withdraw cash. It usually isn't at the cheap rate.
d) Transfer at or within 60 to 90 days of application (check).

Debit cards are debt cards too if you've got an overdraft, and most UK overdrafts are far costlier than typical credit card interest. There's very little competition between banks, with almost all charging 40% interest! 

So, for many, a priority is to clear overdrafts as they're so expensive (even if it means making just minimum repayments on credit cards, so the cash saved on that reduces your overdraft), though before that check out these four ways to cut the interest costs.

a) Switch banks for a possible 0% £250 overdraft & £175 FREE cash. First Direct* gives accepted new switchers a free £175 (see eligibility criteria), and many get a £250 ongoing interest-free overdraft too (it's the standard 40% above that). It has an overdraft eligibility checker on its site to show if you'll likely get it. 

That means if you tend to end up a few hundred quid overdrawn at the end of the month, the £175 should help clear that and the remainder will be interest-free. Great for smaller overdrafts, or those who regularly just dip into their overdraft facility.

It won't switch the overdraft over for you. You'll still owe your old bank, though all your Direct Debits and standing orders will be moved as normal. Expect your old bank to ask if you want to pay off the overdraft at that point, or keep the account open while you do (it varies by bank). If you do keep it open, payments to the old account are unlikely to be forwarded so you may need to arrange to move them yourself.

PS: Launched today (Tue) is a £250 switch offer from Club Lloyds which also has a 0% overdraft 'buffer' but only to £100. Still, if you only occasionally dip into your overdraft, it's a decent deal. It's tougher to get, though, as the minimum income criteria is higher.

b) Shifting your overdraft to a 0% credit card. There are two routes...

• Use a 0% money transfer card. This is a rare function where you get a new card that pays money into your bank account, letting you clear your overdraft, so you now owe the card instead but at 0%. The current top is Tesco 14mths 0% (3.99% fee) then 24.9% rep APR after the 0% ends. As it can be complex, I'd strongly urge you to first read our full 0% money transfers guide, but as a minimum do clear it within the 0% period and follow the balance transfer golden rules above. 
  
  
• Use a 0% spending card (but only if you've got financial self-discipline).The top 0% spending cards, eg, M&S 25mths 0% are interest-free longer than money transfers, and have no fee, so are far cheaper. Yet to do it right takes financial discipline (if that's not you, don't). Here's the recipe to transfer an overdraft to it:
  
  - Use the 0% Spending Eligibility Calc to see if you can get one.
  - Do all normal spending on the card up to the credit limit (it's not a reason to spend more), making only min monthly repayments.
  - As you're using it rather than your bank account, your income should build up in that, reducing your overdraft.
  - Once the overdraft is clear, stop using the card.
  - Then put any extra money towards clearing the card debt before the 0% period ends and the interest jumps to the 24.9% rep APR (though that's still cheaper than most overdrafts).

c) Treat overdraft borrowing like any other debt. Try to repay a set amount each month, eg, £50 (meaning you should always start the next month with a £50 smaller overdraft than the one before).

d) Consider moving Direct Debits to just before payday if you can. The idea is you're overdrawn for less time so costs are lower. And these are just the tip of the iceberg. See our overdraft cost-cutting tips for more help.

After four cuts in the UK base rate over 2025, loan rates have improved a smidge. So, if you've got a loan, it's worth a five minute check to see if you can cut its cost, especially if your creditworthiness or income has improved from when you got it. Full help in Cut existing loan costs, but in brief...

Start by quickly comparing your loan's APR to the cheapest available, if it's more expensive follow my abc below.

a) Ask your current lender for a 'settlement figure'. That's how much it'll cost to clear your current loan, including any early repayment costs. This tells you how big a new loan you'll need to get to clear it.

b) Find the cheapest loan for the 'settlement figure' & whether you'll be accepted. Our Loans Eligibility Calc shows acceptance odds for many loans - do check before applying.

c) Find out whether the new loan's cheaper than your current one. Use our Loan Switch Calculator to do it for you. Or if you want to DIY, multiply your monthly repayments by how many months you have left (ask the lender if you don't know) to find how much you'll pay if you stick. Then compare that with what the new loan repayments will cost.

The cheapest balance transfer credit card deals are interest-free; the cheapest loans for similar amounts are 7%. So, all being equal, balance transfers cost less, as long as you can repay within the 0% period or keep shifting the debt to another 0% when you need to.

Yet for some, in the real world, the problem can be the monthly repayments are too high. While it's best to repay more each month, as it clears debt quicker and you pay less total interest, I understand that isn't always possible. 

With larger debt on cards, the minimum repayments can be higher than the fixed repayments for a loan. This is why some look at 'consolidating' card debts into a cheap loan (though many in this position may struggle to be accepted for one). Eg, if you owe £10,000...

- on a card, the minimum repayments are around £270/mth
- on a 6.2% loan over 5 years, you'll pay a fixed £195/mth

Yet in time as you repay the debt, the card minimum repayments would drop, as they're a percentage of what you owe, so they'll eventually be lower than the fixed loan repayments (though with cards always aim to repay a higher fixed, it'll clear the debt quicker). So... 

- Loans pros: Simplicity and enforced repayment discipline. Get one, keep making the fixed repayment, and you'll clear it within the time. 
- Card pros: Top balance transfer cards, done right, have lower interest costs (provided you can keep getting 0% and fix your repayments).

I'd always hedge for cheapness if you possibly can, as you'll end up with more of your money in your pocket, rather than the lender's, but I accept the reality means lower repayments could help for a few years.

PS: With cards, creditworthiness mainly decides whether you're accepted, while affordability (ie, do you have enough income?) affects the credit limit you get. With loans, because you apply for a fixed sum, both creditworthiness and affordability affect acceptance (eg, accepted at £3,000 but not at £10,000). You can check both for free via the MSE Credit Club (also via the Apple | Android MSE App).