How to get rid of your holiday debts

EurosIf you've overspent on your holiday, the relaxing time you enjoyed while you were away could now be replaced by anxiety and fear.

It's easy to get carried away when you're away from home and there's a card to put everything on. Particularly given over half of us don't set out a budget for our holidays, according to research by M&S Bank.

So how do you go about getting yourself back on track now? Here are some ideas.

Draw up a budget now
You may not have done it on holiday, but now is the time to sit down and work out how much you're spending and what you're spending it on. Write down all your expenditure, from your mortgage/rent right down to that chocolate bar you bought on your way home one night.

Look for areas you can cut back on to free up some money to pay off your holiday spending.

Sell some stuff
If you have CDs you don't listen to, DVDs you don't watch or clothes lying around that you don't wear anymore then you could sell them to help pay off your debt.

You could try the likes of eBay, Amazon Marketplace,'s PlayTrade or the ASOS Marketplace.

Shift your debt to a cheaper credit card
If you're paying a lot of interest on your debt on a credit card, then it makes sense to move it to a cheaper balance transfer credit card. At the moment, if you have a good credit rating you can pay no interest on your debt for up to 28 months with Barclaycard's Platinum 28-Month card.

However, you will have to pay a balance transfer fee for this privilege, which is a percentage of the debt you're transferring, and these vary by credit card. Here are the top combinations of balance transfer period and balance transfer fee.
Credit card0% balance transfer introductory periodBalance transfer feeRepresentative APR when 0% period ends

Bank of Scotland Platinum 24-Month

24 months



Lloyds TSB Platinum 24-Month

24 months



Lloyds TSB Platinum 15-Month15 months0.8%17.9%

NatWest Platinum Balance Transfer and Purchase

15 months



Royal Bank of Scotland Balance Transfer and Purchase

15 months



Tesco Bank Clubcard with Low Balance Transfer Fee

12 months



Once you have that interest-free cushion, chip away at your debt each month. Just make sure when you're picking your credit card you give yourself enough time to pay your debt off in full before you start being charged interest.

If your credit rating isn't great, then you could opt for a low rate credit card. For example, Lloyds TSB offers the Advance card, which charges a representative APR (which means 51% of applicants will receive the rate) of 4.9% for 12 months. There's a 3% balance transfer fee on this card.

Compare 0% balance transfer credit cards

Use an overdraft
Another, potentially free option if you have a good credit rating is to switch banks to one that offers an interest- and fee-free overdraft.

There are only a handful of these around, and the Nationwide FlexDirect is by far the best, as there's no interest and no fees for 12 months.

Use a loan
You should try to avoid paying off your debt with a loan if at all possible, especially a payday loan, unless you've racked up big debts. If that's the case, you should cut up your credit cards, draw up a budget and stick to it.

Otherwise, you face the prospect of still paying your debt off for several summers to come.

If your debt is giving you sleepless nights, you should contact a free, confidential debt advice charity. You can find out more about what help is out there in Where to get free debt advice.

Beware the small print
See Gallery
How to get rid of your holiday debts

It is reasonable to assume that if you take out a mobile phone contract at £30 a month for 24 months that's exactly what you'll pay unless you exceed the tariff. Yet mobile phone providers have come under fire for a snag buried in the small print – a clause to allow mid-contract price rises.

Prices are rising by a median of 81p a month and 70% of consumers are completely unaware off this sneaky move, according to Tesco Mobile, so be sure to check any new contracts before you sign the dotted line.

Financial service providers always refer to 'typical APR' in advertising to attract customers with favourable rates of interest.

Yet the typical APR on loans and credit cards is only available for those applicants who have a squeaky clean credit record, everyone else could end up with a much higher rate. For example, under EU rules, credit card providers only have to provide the typical APR advertised to 51% of applicants.

So always consider this when applying for accounts and products, and if approved – look out the actual APR that you will be charged.

The highest paying savings accounts on the market tend to come with a string of strict terms, which if you fall foul of, result in a drop in interest. Common requirements include paying in a set sum each month and not making withdrawals during a set period.

Make sure to fully understand these terms before opening a savings account and if you choose an account with a six or 12 month bonus, remember that this will plummet when the bonus period ends.

Cashback credit cards that pay you a small percentage each time you spend on the card are full of loopholes in the small print. All have a maximum spend, but many have a minimum spend too.

For example, the Sainsbury's Cashback Low Rate card advertises that it offers users 5% cashback for the first three months. However the 5% cashback is capped at £50 a month. A further 5% cashback is subject to you spending £500 a month on the card (£250 of that at Sainsbury's).

Attempt to repay your mortgage early and you may be greeted with a hefty fee in the form of an early repayment charge. These penalties vary from lender to lender and even deal to deal, but are typically be around 10% of the outstanding balance.

Details of any early repayment charges should be clearly outlined in your mortgage contract but it is worth double-checking with your lender before you try to make a payment.

Insurance is an incredibly complex area of personal finance and different forms of cover are riddled with different hitches that make it crucial to read the small print. Failure to do so could lead you to pay for a product you would be never be able to claim upon, or unknowingly do something that invalidates your claim.

Always buy the right level of cover for your needs and pay close attention to any exclusions in the policy wording. For example, many travel insurance policies for winter sports won't pay out for treatment of injuries incurred while under the influence of alcohol.

Think a credit card can't do any damage at home in your drawer? Think again. Some credit and store cards charge a dormancy fee if you don't use them regularly.

For example, all Santander-issued store cards, including Topshop and Laura Ashley cards among others, charge a fee of £10 if you remain in debit for three consecutive months.

Exceed the monthly usage allowance in your broadband deal and you could be hit with a huge fee. Common with the cheapest broadband deals on the market, penalty charges for going over your contracted limit can push your bills up even higher than if you paid for a deal with unlimited usage.

According to Talk Talk, some households are being forced to pay an additional £40 per month for exceeding their usage allowance. BT for example, charges £5 per every 5GB extra used.

Familiarise yourself with the download limit in your package and the penalties for exceeding it, decide whether you are better off with an unlimited deal.


Read Full Story