MAKING CENTS: Sort out all your credit card debt without delay

Grainne McGuinness offers the latest consumer advice.

I have a credit card that we normally clear in full. But an unexpected big car repair meant it built up from September and then most of our family spending over Christmas was added to it. It’s now over €3,000, and we won’t be able to pay it off completely for several months. I’m worried about how much interest will be added each month. A friend suggested we go to our bank and get a loan but we are worried they will want to cancel the card. It is the only credit card we have, my wife is an authorised user, and we’re concerned about booking holidays and other things with no credit card. What is our best option? Kevin L, Navan, Co Meath

You are right to address the situation. Even a few months of not clearing the debt will lead to high interest charges.

If you want to calculate how long it will take to pay off the debt and how much interest you will pay, the Competition and Consumer Protection Commission have a calculator at www.consumerhelp.ie.

But bear in mind that’s just based on the current balance, it will take longer if you continue to use the card.

There are a number of options available to you. As your friend suggested, if you go to the bank who supply your credit card, they should be open to converting the debt to a personal loan, which will have a lower interest rate. They may want to cancel the credit card as part of the loan agreement.

But if your finances are otherwise healthy, this may not be necessary. You bank could also agree to you keeping the card but with a lower credit limit, so you would still have use of it.

Another option is to transfer your balance to a new card. Tesco Bank, Bank Of Ireland and permanent tsb all offer 0% interest on balance transfers for six or seven months. Ulster Bank and AIB don’t offer 0% but offer rates of less than 4% on balance transfers for up to a year.

If you think a transfer could work for you, and you know that you will need to keep using the card, you should also take the providers’ offers on interest rate for an introductory period into consideration. The rate varies between 0 and 3.83% and is valid for between three and 12 months.

You can compare Irish credit card providers at www.bonkers.ie.

But remember, the new card issuer will assess your application based on your credit history, employment status, income and levels of debt so this is only an option if you are otherwise financially healthy.

Rising credit card debt can also be a sign that you are heading toward financial difficulties, as you didn’t have any wiggle room in your budget to deal with the unexpected car bills. If this is the case, even if your other debt is up-to-date, it might be worth contacting the Money Advice and Budgeting Service (MABS) for advice.

You don’t have to be in dire straits to benefit from their help, you can work with them as a self-help client, meaning that you are happy to handle your own debts, with the support of MABS.

They can offer advice on budgeting to prevent your situation deteriorating. For information on how to get started, call the MABS helpline on 0761-072000.

One thing to bear in mind is that having a credit card is no longer as necessary as it might have been a few years ago.

You mentioned holidays in your letter, but the debit card attached to your current account can be used to book virtually everything now — in some cases, the charges are lower if you use a debit card. If you want to keep spending separate from your current account, there are prepaid credit cards available from 3 Mobile, Swirl and Skrill.

Alternatively, if you want a card specifically for a trip abroad, check out the Currency Card available from An Post.

DEAL OF THE WEEK

New parents soon figure out that their little bundles of joy come with a hefty price tag. And mums and dads have enough to be doing readjusting to a whole new sleep-deprived life without the stress of trying to bargain hunt.

The solution? Download the BabyDoc App to your smartphone and let them find the deals for you. The app and website find offers on everything from nappies to baby equipment from retailers such as Dunnes Stores, Tesco, Lloyds Pharmacy and Mothercare.

Bargains they are currently highlighting include multi saver deals from Dunnes Stores on nappies. They have Pampers New Baby Jumbo Packs on offer at 2 for €20 — a saving of €10. Pampers Jumbo+ Packs on Baby Dry, Active Fit and Baby Dry Pants are available in a 2 for €22 deal, saving parents €8. They also have deals on wipes and Johnson’s baby toiletries.

You can download the BabyDoc app free for both iPhone and Android.