How you can beat the holiday hangover
August is nearly at an end and itís likely that most of us will have already made our annual escape from the office. Whether itís an elaborate trip abroad though, or the newly fashionable ëstaycationí, holidays can be a costly business and even the most modest of plans have a habit of surprising us with unforeseen expenses!
It also seems that many more of us are determined to holiday beyond our financial means. Itís estimated that around 12 million Brits borrow money to fund trips abroad with many turning to credit cards or even loans to ensure we get our week in the sun.
With autumn fast approaching, though, itís time to rein back the summer excesses and start getting those debts under control. MoneyExpert.com gives some top tips.
Out of sight not out of mind
If youíre lucky enough to already have been abroad this summer itís more than likely that youíll have made payments using a debit or credit card, and in doing so, particularly with a credit card it offers the benefit of added security as well as convenience. If youíve used your credit card to withdraw cash, though, you could be facing some serious interest payments unless you can clear your balance as soon as you return.
These days the average APR for cash withdrawals on credit cards is a rather considerable 25.5%, which means that £500 withdrawn abroad and not cleared on your return will have cost you an additional £125 by this time next year. Many credit card providers will clear cash withdrawals last, with purchases and balance transfers being cleared first, meaning that until you clear your entire balance youíll be paying the highest APR.
Move To A 0% Credit Card
Whether itís from spending on a holiday or on more everyday costs, the interest on a credit card can soon rack up. According to Abbey the average credit card user has a balance of just over £3,250 and with the average APR on purchases now over 18%, those not clearing their balances will typically be paying at least £585 a year in interest alone.
There is good news though, that despite the much hyped demise of the balance transfer market there remain a number of products offering good balance transfer deals that will see the interest you pay on your existing balance slashed. The Virgin Credit Card still tops the pile offering 0% on balance transfers for 16 months, but those from NatWest (for existing customers), HSBC, and the Royal Bank of Scotland all boast 15 month deals.
Bigger is better
If moving a credit card balance to a competitive 0% balance transfer credit card isnít an option, or if youíve amassed debts across other products such as overdrafts or loans it may well be a better solution to consolidate what with you owe into one lump sum.
Debt consolidation as a tool for managing your finances has had a fairly negative press, but itís only a bad option if consistently used simply to fuel more borrowing. APRs on credit cards are obviously high but those on overdrafts can be equally punitive. By taking out a single loan to clear your existing debts you may well find a far better rate and will have the added convenience of having to consider only one monthly payment.