'I tried Martin Lewis' credit card tip and paid off my debt'
Amber Middleton
Content writerNetmums' Amber Middleton found herself in a sticky situation owing money on various credit cards and overdrafts – until she tried Martin's handy tip
I'm the first one to admit that getting into debt is a slippery slope.
Following years of London life amid the cost of living crisis, I found myself, like many people, relying on a spot of borrowing to get me through: a couple of overdrafts paired with a shiny new American Express credit card.
One day I realised I'd racked up around £6,000 of debt, and I was paying at least £150 worth of interest each month.
It was around this point I realised I should probably tackle the debt. But how was I going to pay it off with so much interest?
I turned to the one man I knew I could rely on: Martin Lewis.
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'Paying credit card interest? STOP'
Many will have heard Martin Lewis' 'golden rule' to help pay off your debt in the past.
Speaking on the Martin Lewis Money Show Live on Monday (29 January), the Money Saving Expert (MSE) CEO explained it to viewers: 0% balance transfer credit cards are a great way to shift your credit balance.
You essentially move your credit card balance – with some cards having interest rates of 30% over the year – onto a credit card with a 0% interest rate.
This means you are no longer paying interest for a set period, helping you clear the balance quicker.
Speaking on MSE, Martin explained: 'Paying credit card interest? STOP. A balance transfer credit card can save you £1,000s by slashing the interest you pay.
'With a 0% balance transfer you get a new card to pay off debt on old credit and store cards, so you owe it instead, but at 0% interest.'
You tend to have a 0% period, for example, 28 months, and after this, you will start getting interest on it, which can be quite substantial – so you need to make sure you can pay it off before this period ends.
I was keen to try anything
When I came across Martin's tip last year, I jumped on the idea straight away.
At this point, I had the credit card, two overdrafts, and not to mention various buy now pay later debt to get rid of, so I was keen to try anything.
The AMEX was my main issue: It had started as a way to build my credit score and quickly spiralled in the complete opposite direction. I ended up with £2,000 on the card.
And ironically, because I was at the limits of borrowing on most of my cards, my credit score had actually dropped.
The interest was so hight that I would be paying around £600 during the full year for the AMEX – without even looking at my other cards.
After hearing Martin discuss the 0% tip, I headed to MSE's credit card eligibility calculator to see what 0% cards I could be eligible for to help me tackle my debt.
The calculator is a handy tool to find out what cards you can get – I couldn't risk applying for a credit card, getting turned down and having my credit score drop further.
MSE told me I'd likely be accepted for a credit card with Vanquis which had a nine month period of 0% interest and a limit of £1,000. All I had to do was pay 2.9% of my transferred debt.
MSE explains that you can get 0% cards with a lot longer on them and a higher limit. For example, Barclaycard offers 0% for up to 29 months with a 3.45% fee.
You can also get some cards with no transfer fee, such as NatWest which offers 13 months' worth of 0% with no fee attached.
But due to my shakey credit score, the Vanquis option was all I could get.
I applied and the next thing I knew, I was the proud new owner of a brand new credit card.
I transferred the balance to the card which was easy to do via the Vanquis app. Initially, I wanted to move over the balance from an old overdraft instead, but I soon found out that the hack only works for credit cards.
Is this for me?
MSE says that you must be careful when applying for a 0% credit card – don't get one if you think you'll be tempted to spend on it.
To avoid temptation, Martin even suggested freezing your bank card when it arrives so you don't get tempted to buy something on it.
And this refers to literally putting it in a pot of water in the freezer, not to pause your bank card on the app.
There are other points to weigh up before you go ahead with transferring your balance to a 0% credit card.
MSE explained that sometimes you will also have to pay a small transfer fee and you have to weigh up whether the price is worth what you would be spending on interest.
For me, I was paying around £50 a month in interest on the AMEX. This would be cut in half by transferring £1,000 of it to an interest-free card.
The transfer fee was 2.9% of the transferred balance, so £29. I felt this was reasonable considering I would have spent that in interest during one month, had I not transferred the debt.
Pricey interest rates
You should also be aware that these 0% cards come with a pretty brutal interest rate when the 0% runs out, so make sure you can pay off the balance before it runs out. After nine months, mine shot up from 0% to 29.3%.
Martin explained: 'If you cannot afford to clear your credit card or your debt in full and you're paying interest, you cannot afford not to check for a 0% balance transfer.'
MSE has five golden rules that are important to remember with a 0% transfer card:
- Always clear the debt or shift the balance again before the 0% rate ends
- Pay off the minimum payment each month or risk losing your rate
- Don't spend or withdraw as cash as it is often expensive
- To get the 0% and the fee, you usually have to transfer within the first one to three months
- You can't transfer to a 0% card at the same bank usually
Pay off the minimum payment
As the golden rules mentioned, one of the main things to remember is to pay off the minimum each month. My minimum payment was only £25 each month which I paid off via direct debit while I targeted my more pressing debt, which at this point had the higher interest.
After four months of paying £25 per month, I increased the minimum payment to £100, and then again to £200 in my final few months of the 0% rate. Before I knew it, the £1,000 I owed had been paid off.
Clearing the rest of my debt
For my debt situation, the 0% card was just one step to clearing my debt, with Martin continuing to lead the way on my journey to owing nothing.
One of his simplest steps gave me a huge helping hand: making a budgeting plan and living within my means.
While some people have gone back to using cash to budget, I used a spreadsheet to keep track of my spending, separating money into categories such as travel and weekly shop costs, and setting myself a weekly allowance for extra expenses: such as a coffee on the way into work or events with friends and family.
I also followed Martin's bank switching tip, switching bank accounts twice to claim joining bonuses, and using that money to pay off further owed money.
To pay off my overdrafts, I used my savings – another MSE tip – because the interest I was getting in my savings account was minuscule compared to the interest on the debt.
I was able to borrow money from my parents to pay off a bit more, who kindly offered me an interest rate of 0%, of which I pay off monthly with a direct debit, just like the Vanquis card.
All in all, the 0% card, along with a few of Martin's other tricks saved me from spiralling further into a tricky situation, but it's up to you to find what works best for your situation.
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