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Reducing credit card debt

As we've discussed elsewhere, credit card borrowing is often particularly expensive. Many of us reach for a credit card at the checkout, possibly forgetting that we're dealing with real money.

If you don't pay your credit card bill off in full each month, then you soon start to notice those high interest rates kicking in. There's no doubt that credit card debts can really mount.

There's nothing more frustrating in the world of personal finance than seeing money going out of the door simply on interest payments. As we explained earlier in this series, reducing the rate of interest that you pay on a mortgage can have an important impact on your financial situation. It's just the same with credit cards, particularly if you have run up a significant amount of borrowing. So what are your options?

Pay it off quickly!

This may sound like an obvious point to make, but many financial experts would agree that it makes sense to pay off your most expensive debts first. Since credit cards often fall into this category, they make a good starting point when you think about your levels of expenditure.

Removing those credit card debts from your monthly outgoings means that you'll have more money left over to use on what you really want.

Balance transfers

Although balance transfers may not be as great a solution as they once were (since many lenders didn't charge for them at one point in time), they still represent a good option for reducing your monthly outgoings.

Most balance transfers involve paying a charge (often of around 3% of your outstanding debt) in return for a period of 0% interest. This can work well - it's really a question of sitting down and doing the maths. Could such a deal save you money? If so, it makes sense to switch.

Carrying out a balance transfer is usually surprisingly easy - once you've identified a suitable offer, you'll usually need details of the card that you want to transfer to, that you want to transfer from and the amount of debt involved.

Further Reading

Money savings tips
Saving on the big things in life
Spending less on rent
Reducing credit card debt
Debt consolidation loans

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