Worrying new figures show interest's being charged on 50% of credit card debt
Martin: 'Here's my 8-step plan to cut high credit card interest rates. Can you save £100s or £1,000s?'

If I've got a catchphrase, it's definitely a loud 'pay off IN FULL' when it comes to credit cards, then you get the benefits and pay no interest. Yet new UK Finance stats show credit card debt is up 9% in a year, and 50% of that debt has interest charges levied on it.

For some, that's due to inertia or apathy, but for many, it's likely about being rejected for lower interest deals. Jay tweeted: "@MartinSLewis We've a close friend in the middle of a messy divorce. She needs to balance transfer but is getting rejected. She is desperate but has nowhere to go?"

So I've come up with an eight-step plan. There's no perfect solution, but if there is a route, following these steps should find it.

Step 1: Don't assume you'll be rejected. There's no risk to first using a balance transfer eligibility calculator to see if you can get a top deal.

A balance transfer credit card is where you apply for a new card to repay existing credit or store cards for you, so you owe it the money instead, but at 0% interest (ie, interest-free). That way your repayments clear what you owe - rather than just covering interest - so, as long as you don't borrow more, you get debt-free quicker.

• Use an eligibility calc. Our 0% eligibility calculator (some card firms have their own) show your odds of being accepted for the top picks WITHOUT any impact on your creditworthiness (unlike applying for a card, it only does a soft credit search, so you see it on your file, but lenders don't). That way you can see if you've a chance of getting one without any impact or risk.
  
  
• Lucky enough to have a choice of cards? Aim for a 0% deal long enough to clear your debt. They're up to 29 months 0%, though try to minimise the balance transfer fee (the one-off percentage fee of the amount of debt you transfer). Unsure? Play safe and go long.

Step 2: Only low odds of getting a card? Don't be put off. A 20% chance means two in every 10 applicants are accepted - you could be one of those two.

Many people tell me: 'I'm worried about applying because it may impact my credit score.' Yet the whole point of maintaining the best possible credit score is to help you get accepted for needed credit products. And cutting debt costs is a very important use. So it's worth it.

If you've only a low chance, it's worth a try. Adam emailed me after listening to my podcast: "I applied to the top eligibility checker result, which estimated I'd just a 20% chance and, guess what, I was accepted with a £3,500 credit limit, two years' 0%. I can now focus on other debts, potentially having an extra £1,300ish. You mention the link between money and mental health. Well... your advice has really lifted me."

Step 3: If you get a card, but the credit limit isn't enough to shift all your debt, don't just not bother, move what you can, then you can apply for another.

Once you've applied for a card, it marks your credit file, so don't waste that. Use it to shift as much of your highest interest (APR) debt as you can to get it at 0%. Once it's on there, just go back to Step 1 and see your odds for being accepted for another provider's card, and move what you can there. Though each subsequent application can get harder, as too many can look to lenders that you're desperate for credit.

Step 4: Can't get a top deal? If you've spare credit limit on one of your existing credit cards, see if they'll give you a balance transfer deal.

Some cards allow existing customers to shift debt to them from other cards at 0% (an existing customer balance transfer). They aren't usually as good as new cardholder 0%s, but they're better than nowt.

They usually send them out as marketing mail or emails offering this. So if you've more than one card, call them all to see if they'll offer this. Virgin Money, NatWest and Halifax commonly do. See the credit card shuffle for how this all works.

PS: The existing debt you already have will still be at the higher rate. So if you've a few cards with spare room, you can try to play, eg...

Card A. Debt: £2,000, credit limit: £3,000, APR: 18%.
Card B. Debt: £1,000, credit limit: £2,000, APR: 18%.

If Card A offers a 0% balance transfer, you could simply shift £1,000 from Card B. Or in some cases, you try first shifting £1,000 from Card A to Card B (even if at its full rate), then once done, shift £2,000 back to Card A so you've more at 0% (as long as nothing changes in the meantime).

Step 5: There are cards aimed at people with poorer credit, but be careful about how much you move there.

A few providers offer cards for those with a patchy credit past, though the 0% period is a lot shorter. Some will allow you even with past defaults or county court judgments (CCJs). Most of these are included in our eligibility calculator, but they're worth breaking out because of one big difference.

• The interest rate after the 0% ends will be horrid. All these cards charge up to 34.9% rep APR after, so compare it against your current card's interest rate. If your current card's rate is higher, then shift as much debt as possible. If it's lower, then only shift the amount of debt you're sure you can clear within the 0% period, as you don't want it to be stuck at the higher rate after.

Step 6: Can't get any new 0% credit to help? Then if you've spare credit limit, try to move the debt somewhere cheaper, even if it's at 18%.

Earlier (in Step 4), I talked about existing customer balance transfers. Even if they're not offering that, if you've a few credit cards, just moving stuff around to where it's cheapest can help. For example:

• Card A. Debt: £2,000, credit limit: £2,800, APR: 18%.
• Card B. Debt: £1,000, credit limit: £1,000, APR: 25%.

In this scenario, you could ask Card A if you can shift some debt to it, at 18% from Card B, as it's slightly cheaper. Again, see the credit card shuffle for help on this.

Step 7: Focus on clearing the highest interest rate (APR) cards and overdrafts first.

Some try to repay their biggest debt first, or spread repayments equally. However, it's the debt with the highest interest rate (APR) that's growing most quickly, so that's the priority to pay off.

Once you've moved all your debt to where it's cheapest, list all your cards and loans in order of APR (it's more complex with loans, as there can be early repayment penalties). Then focus all spare cash on clearing the highest rate debt, paying just the minimum on all others. Once it's clear, focus on the next highest rate, and so on. This will get you debt-free quickest.

The only exception is if you've a 0% card soon to end that'll go to a hideous rate. Aim to ensure it's interest-free by the time it ends.

PS: Overdrafts are debt too and are often costlier than cards. Most banks' overdrafts are at 40% APR - far more than most credit cards. So if you're overdrawn, unless you've even costlier debt, pay just the minimum on your credit cards and use any spare cash to get out of your overdraft. See Cut overdraft charges for more help.

Step 8: In debt crisis? Get free debt help NOW.

My steps above are about cutting the cost of interest, but that still may leave you in a difficult position, which means you'll need a different tack. So I've three questions you should ask yourself...

- Do you have sleepless nights or depression/anxiety over debt?
- Do you struggle to meet minimum monthly payments?
- Is your total debt (excluding mortgage/student loan) over a year's salary?

If you answer yes to any of these, forget balance transfers and instead get free, one-to-one debt-counselling help from Citizens Advice, StepChange or National Debtline. They have many tools, including 'Breathing Space' which can stop your creditors chasing you for a time.

And if you need emotional support, try CAP. They're there to help, not judge. The most common thing we hear after is: "I finally got a good night's sleep." There's no stigma, you can sort this. Read inspiring stories in our Debt-free wannabe forum, and see our Mental Health & Debt and Debt crisis help guides.