It's time to cut your bills

AS household bills continue to soar, increasing numbers of Bristol families are turning to credit cards, overdrafts and payday loans to cover essential outgoings.

The Consumer Credit Counselling Service says more and more people in the city struggle financially every year, with credit card debt being a major contributor. The latest figures show personal insolvencies in Bristol have increased by more than 500 per cent since 2000, and last year, the charity helped 1,500 people in the city with their debt problems.

A study for the bank Santander revealed that more than a fifth of respondents in the South West did not have enough money coming in to meet their outgoings and had to look to alternative funding.

Reza Attar-Zadeh, banking director at Santander, said: "In an ideal world, household bills should be one of the first costs to be covered when payday arrives, but as the research highlights, this isn't always possible. The cost of living is going up, driven in part by the rising cost of household bills, and as a result, millions of people are regularly borrowing money to make ends meet which cannot be sustained in the long run.”

The bank wants more people to look at ways of cutting their bills – such as paying by direct debit, which often attracts a discount, and using cashback accounts and credit cards.

If you are worried about your debts, the CCCS website lists many places in Bristol and the surrounding area where you can go and get face-to-face help.

Meanwhile, the free and independent Money Advice Service is running an online, print and TV campaign this autumn to try to make us more financially capable.

It says only 49 per cent of people in the South West questioned for its research could recall ever receiving financial advice.

The national figures are similar, with the least well-off also shown to be the group least likely to seek help.

The television adverts from the service, which was set up by the Government to try to close the “advice gap”, focus on everyday conversations in real-life situations when money matters.

Another study, for Moneysupermarket, shows that one in five people has used a credit card this summer to cover bills. Not all of them know how they are going to pay off the bill.

But experts say that if you use a credit card wisely, it can help you manage your finances efficiently.

One solution is to move to an account offering 0% interest.

Kevin Mountford, head of banking at MoneySupermaket said: "Transferring any existing debts from summer spending on to a balance transfer card such as the Barclaycard Platinum Credit Card with Extended Balance Transfer offering 22 months interest free can help spread the cost over that promotional period. Make sure you repay at least the minimum payment on time each month, though, or you could lose the 0% deal."

According to research by MoneySupermarket, switching a £3,000 balance from a card with a market average standard rate of 17.31% to the Barclaycard deal would save you £696 in interest over the 22-month term of the deal. This figure factors in the card's 2.9% balance transfer fee.

Halifax's Balance Transfer Credit Card also offers 0% on balance transfers for 22 months, but has a higher 3.5% balance transfer fee.

If a lower transfer fee is a priority, then it may be worth considering Barclaycard's Platinum Credit Card with Balance Transfer, as this offers shorter 21-month 0% introductory period, but has a 2.6% transfer fee. After the introductory periods on these cards finish, all three of them have a typical representative APR of 17.9% (variable).

Alternatively MBNA's Platinum Credit Card offers 0% on balance transfers for 20 months, and has a 2.85% handling fee. After this, the card has a representative APR of 18.9% variable on any remaining balance transfer.

A good rule of thumb is never to spend using a balance transfer card, as you will usually be charged relatively steep rates of interest on all new purchases if you don't clear your purchases balance each month.

If you don't want separate cards for spending and balance transfers, your best bet is to go for a credit card which offers a 0% introductory rate on both.

Halifax's All in One card, for example, has a 0% introductory period for 15 months on both purchases and balance transfers.

There is a 3% handling fee to pay on balance transfers and, once the introductory period is up, the card has a representative variable APR of 17.9% on both purchases and balance transfers. This makes it important to do everything you can to pay off all spending and existing debts before this rate kicks in.

Other competitive cards for balance transfers and purchases include Barclaycard's Platinum with Purchase card, which offers 0% on both for 14 months, subject to a 2.9% balance transfer handling fee. After the introductory period ends, the card has a representative APR of 18.9% (variable) so once again you should try to clear your balance and pay off any new spending within the first 14 months.

The Tesco Clubcard Credit Card for purchases is also worth a look. It has a shorter nine month 0% introductory period for balance transfers, and a 16-month 0% period for purchases. If you are moving a balance over from another credit card, you will be charged a 2.9% transfer fee.

Once the 0% offers end, you'll be charged an APR of 16.9% on purchases and 18.2% on balance transfers. This card also doubles as a Tesco Clubcard so can be used to collect standard points on shopping in Tesco and on other spending as well.

Whichever card you are considering moving your existing credit card balance to, always make sure you pay off what you owe during the introductory period - otherwise interest will quickly mount up. One way to be certain you'll do this is by setting up a direct debit every month, so that payments will be made automatically.