How to pay off your credit-card debt

It's set to be a record-breaking year for the economy but not in a good way. House prices have collapsed, unemployment is rising, and even though interest rates are at their lowest in more than 300 years, that's because we're likely to see deflation later this year, which makes holding debt more costly. So, if your finances are in the red, it's time to sort them out. One way to go about paying off your debt, is to shift it all onto a 0% credit card and then pay it off in chunks each month.

Before you start shopping for a 0% card you need to ask yourself a couple of questions. How big is your debt? And how quickly can you realistically pay it off?

If you don't have much debt and can thus pay it off quite quickly, you should opt for a fee-free 0% balance-transfer card. These tend to offer shorter interest-free periods but don't charge you a balance-transfer fee. Martin Lewis of Moneysavingexpert.com suggests the Abbey Zero card, which offers six months at 0% and no fee. To apply call 0800-587 2758, or visit an Abbey branch. If you know it's going to take longer to pay off, opt for a 0% card with a fee as these tend to offer longer repayment periods. MoneyFacts.co.uk reckons the best available just now is the Virgin Money Credit Card, which offers 0% for 16 months with a 2.98% balance transfer fee. Call 0800-096 9939, or visit uk.virginmoney.com to apply. If you already have a Virgin card, check Moneyfacts.co.uk for other options.

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Once you have your card, set up a direct debit to pay off a chunk of the total each month. If you are late with a monthly payment you can put the 0% rate in jeopardy, so make sure you transfer the money in plenty of time each month. And don't forget the golden rule with 0% credit cards don't spend on them. As with most credit cards, you will pay off the money accruing the least interest first. So if you buy anything with your card you'll be running up interest at the provider's typical APR on that amount until you have paid off your entire balance transfer amount.