This credit card could save you £500

If you have mountains of expensive credit card debt, switching to a more forgiving flexible friend could save you a fortune. Katy Ward could find herself more than £500 better off just by changing her plastic.

Having hit my late twenties, I've managed to wrack up £4000 of debt on a collection of credit cards. To make matters worse, I have nothing to show for my extravagance except snapshots of long forgotten holidays and Sunday morning hangovers.

Sadly, I'm not alone in my fondness for the good, old plastic. According to trade body the UK Cards Association, there are 30 million credit card customers in the UK holding 66 million cards. It seems as though my past carefree attitude to debt is typical of us Brits.

This year, I have resolved to confront my financial woes head-on and get back to financial health. Read on to join me on my debt-busting journey.

A financial health check

My first step was to get hold of my credit report. Foolishly, I have never checked my report before and was more than a little apprehensive. All the worst case scenarios flashed through my mind. Had my financial faux pas ruined my chances of getting a mortgage?

You can get a hold of your report from one of the UK's three credit referencing agencies Experian, Equifax and Callcredit. Sitting at my desk on a Tuesday lunchtime, I decided to take the plunge and check my report online with a free 30-day trial from Credit Expert (from Experian).

After entering some basic personal information, my report was ready in a matter of minutes. In fact, the biggest challenge was trying to remember the postcode of a dingy flat I gladly left behind three years ago!

Make sure you read the fine print carefully. It is free to access your report but you will have to pay £5.95 to see your score (which I decided to do).

The results are in….

Thankfully, my rating wasn't nearly as bad as I had dreaded. My score of 821 puts me in the 'fair category.' Apparently, only 38% of people have a score better than 'fair.' My result might not be great but it could be much worse!

If you're worried about your score, it may well not be as bad as you fear. Whatever your financial position, it's always worth keeping an eye on your credit report. At the very least, this is one of the most effective ways to combat identity fraud and gives you a chance to dispute any information you believe is incorrect.

Remember, there are plenty of ways to boost your credit score. Check out Victoria Bischoff's article How to improve your credit rating to learn more.

Attacking my debt

Now, it was time to formulate my plan of action. After taking an honest look at my finances, I worked out I could afford to put £250 a month toward paying off my credit cards. Needless to say, I would have to tighten my belt considerably. This would mean cutting back on luxuries such as meals out and trips to the pub but this seems like a small price to pay to dig myself out of a financial hole.

My repayment plan…

Sadly, my £4,000 worth of debt is languishing on a card with a 19.9% interest rate (higher than most). This means I'll be hit with whopping interest payments before I pay off what I owe.

Let's take a closer look at my budget...

Starting balance: £4,000

Interest rate (APR): 19.9 %

Monthly repayments: £250

Lifetime of my debt: within 19 months

Interest: £620.28

In a nutshell, it will take me up to 19 months to clear my debt and I'll fork out £620 in interest. That's a pretty depressing picture.

Shopping around

Thankfully, I do have options. My best hope is to apply for a 0% balance transfer deal such as the Virgin Credit Card. If I'm accepted (fingers crossed) I can avoid interest payments for up to 16 months.

With a balance transfer, my new budget seems more attractive.

Starting balance: £4119.20 (including balance transfer fee of 2.98%)

Interest rate: 0% for 16 months

Monthly repayment: £250

Lifetime of my debt: between 16 and 17 months

Interest: £0

By scrimping and saving, I could pay off my debt before the 16 month introductory offer expires and avoid interest all together. Although I would need to make an extra large payment one month, I would save £501.08 in interest.

Long term, low rate deals

If you're in a similar financial position but suspect you won't be able to pay off your debt before the interest free offer expires, you could consider a long term, low rate deal.

Although you'd still pay interest, this is likely to be a much more favourable rate. At present, the Barclaycard Platinum Simplicity deal offers one of the best deals on the market at 7.8% APR.

This is much more favourable than the 16-17% charged by most lenders. Even better, this deal will last until you have repaid the amount you transferred over.

A debt free future

It's reassuring to think I'll be free from my financial headache in just 16 months. Hurray! Admittedly, I'll probably have a small celebration when the statement arrives proving I've finally paid off my credit card. However, this won't be anything too outlandish - or expensive!

From now on, it'll be two-for-one restaurant deals whenever I dine out. What's more, I'll get saving for an emergency fund should anything go wrong in the future.

If you've never got into trouble with your plastic, learn from my mistakes…

**Articles featured on BeatThatQuote.com are for information purposes only and reflect the views of individual writers. Articles are not, and should not be considered as, financial advice. BeatThatQuote.com strongly encourages our readers not to rely solely on information contained within our website, but to conduct their own research and seek independent advice about the financial products they purchase.**

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