How to clear your credit cards

If you're paying a hefty rate of interest on money you owe it's worth checking whether you can make these cheaper by arranging a balance transfer to a card that charges a lower rate. This would mean that less interest gets added to the balance so more of your repayments go towards clearing the debt.

You have two options here: either move your balance to a card offering a temporary 0% deal, and benefit from paying no interest on your balance until the offer expires; or, move your balance to a card offering a low rate on your balance until it's paid off (also known as a lifetime balance transfer card).

0% balance transfer credit cards
A credit card offering 0% balance transfers will usually mean you pay no interest on your transferred balance for anything up to 16 months. This can give you valuable breathing space to really focus on paying off the balance without worrying about interest. As soon as the introductory offer ends however you'll be hit with card's standard interest rate, likely to be in the region of 15-20%.

As such if you're moving to one of these cards you'll have to make sure the balance is paid off within the interest-free period, or otherwise move your balance in plenty of time to another 0% card if you need more time to pay it off.

Remember too that transferring your balance will incur a handling fee, often around 3% of however much you transfer, so this is something to factor into your calculations.

Lifetime balance transfer credit card
A lifetime balance transfer credit card may suit those with a larger balance to clear because they work by adding interest to your debt but only at a low, fixed rate. If you have a relatively sizeable debt on your credit cards that will take a while to pay off, and particularly if it is on a card with a high interest rate, transferring it to a card with a low rate that will stay the same until the balance is paid off may be very beneficial.

The biggest drawback of lifetime balance transfer cards is that you will still see interest being added to your debt - albeit at such a low rate that it may be worth it in the long-run. It's also worth noting that sometimes a 'life of balance' deal may mean only five years or so; so if you anticipate it taking longer than this to clear the debt you'll have to make sure you can jump to a new deal at the end of the five years.

Both 0% and lifetime balance transfer credit cards will significantly reduce the interest you're paying on your debt and as such will allow you to focus your efforts on clearing the balance rather than seeing much of your repayments go towards ballooning interest. By weighing up the pros and cons of each and considering the exact details of your current credit card debt you should be able to decide which one will be better suited to you.

It's also worth noting that if you opt for a card that allows money transfers, you may be able to use your new balance transfer credit card to cut the cost of some of your other debts - such as your overdraft.

How do I do it?
To arrange a transfer you'll have to apply for the card of your choice, then request a balance transfer either over the phone or online. Supply the details of the balance you wish to move to your new, lower rate, and that will be transferred over to your new card, leaving your previous cards clear. You can now focus on paying off the balance on your new card.