How to get a grip on your personal finances in the new year

It’s been a tough year for millions of people, and 2023 is looking even worse. Here are some remedies to try

Are your finances feeling (even more) fragile as a result of Christmas spending? It’s been a really tough year financially for millions of people, and with a recession looming, mortgage and rent costs rising and the energy price guarantee becoming less generous from April, 2023 looks set to be even more challenging.

If you are in serious financial difficulty, seek free advice from an organisation such as StepChange or National Debtline as soon as possible.

However, if your situation is not quite so precarious, there are things you can do to get your finances into better shape. Now is a good time to take stock and look at where you can take action.

Cut your credit card costs

Many people’s plastic will have taken a pounding during the last few weeks, and some will have racked up a not inconsiderable credit card bill.

However, many individuals with credit and store card debt could save hundreds of pounds, or even thousands, by transferring these balances to another provider offering a better rate. In some cases you could pay no interest on your debts until well into 2025.

Balance transfers can be a very good way of saving money on existing debts. Your aim should be to have paid off all that you owe by the time the promotional period ends.

The weeks immediately after Christmas are typically the most popular for switching card balances. Official industry data shows that in January 2022, consumers made 682,000 transfers, with almost £1.4bn moved in the space of 31 days. The average amount transferred was just over £2,000.

Some credit cards are offering interest-free deals lasting for more than two years. The main benefit of a 0% balance transfer deal is that all of your monthly repayment goes towards clearing the outstanding balance, and therefore the debt can be cleared much more quickly – but you do need to be disciplined. Also be aware that there will often be a fee to pay, which is typically a small percentage of the amount of debt being moved.

Credit cards
The weeks immediately after Christmas are typically the most popular for switching card balances. Photograph: Andrew Matthews/PA

NatWest is offering 0% interest on balance transfers for 33 months where the fee is 2.9%. With this deal you have to earn at least £10,000 a year. Meanwhile, M&S Bank is offering 0% interest for 28 months (2.99% fee), while at Sainsbury’s Bank it is 0% for up to 30 months with a fee of 2.89% or 4%.

Some providers have useful calculators on their sites that will quickly show you how much you might be able to save. For example, M&S Bank says someone transferring £2,000 from a card with a rate of 23.9% APR and who repays £80 each month could save £622 by switching to its plastic.

Get a better overdraft deal

Authorised overdrafts are designed for short-term borrowing but the costs can vary dramatically.

Many banks have overdraft calculators on their websites, so log on and compare what your bank charges versus what you would be charged if you took your custom elsewhere.

For example, borrowing £500 via an authorised overdraft over 30 days would cost a Barclays standard account holder £12.45, while for a standard NatWest customer it is £13.87. At Nationwide you would pay £13.99, at Lloyds it’s £13.86, and at HSBC it would be £13.29. At the app-based bank Monzo, the cost would be £7.20, £10.58 or £13.72, depending on which of its three interest rates you pay.

Signs outside branches of banks
Many banks have overdraft calculators on their websites. Photograph: Bloomberg/Getty Images

But can you switch your current account if you are overdrawn? The answer is yes, says the Current Account Switch Service. However, you will need to agree any overdraft you require with your new bank. Alternatively, they may be able to provide facilities to help you pay off your existing overdraft.

Consider consolidating your debts

If you are juggling various costly debts such as store card and credit card borrowing, you may be able to save money by consolidating them into one cheaper personal loan, where the monthly repayments remain unchanged and the debt is guaranteed to be gone by the end of the term. This is not an answer for everyone but it will work for some people.

There are best-buy personal loan deals now available at less than 5%. For example, HSBC, First Direct, M&S Bank and the AA are all offering rates from 4.9% APR. However, quite often, only applicants with a decent credit record get these table-topping rates.

The structure of a loan, with set monthly repayments, will appeal to some. But before taking the plunge, think about whether you really need a loan, and if another product such as a credit card might suit you better.

• All rates and details correct at time of writing.


Rupert Jones

The GuardianTramp

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