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Sort out your debts

Sorting out your debts. Now there’s a good New Year’s resolution. And one many of us sign up for. Bank Santander claims that more than 2.8 million people will transfer their credit-card debt this year. And now could be a good time for cutting the cost of your credit-card debt.

Only a couple of years back you’d be hard pushed to find a decent balance-transfer deal, as banks reined in lending. But now lenders have wised up to a tentative economic upturn to once again tout their services. Barclaycard is offering 17 months interest free, while MBNA, Virgin and Natwest all offer 16 months.

But it’s not as simple as simply signing up for a balance transfer deal. You first need to think about how likely you are to be accepted. If you’ve defaulted on repayments or have accrued substantial debt on many cards, you probably won’t qualify.

Check out Moneysupermarket.com’s ‘Smart Search’ facility. You fill in a form with details about you and your debt, and it will list the best credit cards available for you. If your credit rating is poor and the interest-free deals won’t accept you, then go for a low-interest, life-of-balance card instead – for example, the Barclaycard Platinum Simplicity card, which carries a rate of 6.8%.

Then, once you have your new card, you must set up a direct debit to pay it off. You at least need to pay the minimum each month to avoid penalties, but you should also make additional payments on top to clear the card. You’d be well-advised to set up a direct debit that clears the card before the 0% deal runs out.

It’s always vital to read the small print. Make sure that once the deal ends there’s no annual fee, or a charge for not spending on the card. Check what the interest rate will be when the 0% deal ends and then make sure you move your debt to a new deal.

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