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Prioritise for debt management

Britons have been advised to improve their financial situation by identifying their most damaging debts.

David Kuo, director of personal finance website the Motley Fool, said that people should take a logical approach to their debt situation by paying off the loans and credit cards with the highest interest rates first.

He urged consumers with a high level of borrowing to assess each debt on its own terms and make a decision over which ones should take priority.

With recent research showing that credit card charges have reached their highest level in two years, Mr Kuo also warned borrowers against building up major credit card debts by concentrating on reducing their mortgage.

“While it is very nice to try and get your mortgage down as quickly as possible, you must not do it at the expense of incurring credit card debts,” he commented.

“No matter how small that credit card debt is in comparison to the size of your mortgage, you have to try and repay that credit card bill as quickly as possible.”

Research from states that UK credit card holders now pay an average of 1.1 per cent more in annual interest on their cards than they did two years ago.

According to the report, the nation’s collective outstanding credit balance currently stands at £64.8 billion, meaning that rate increases have generated an additional £712.8m for providers.

Mr Kuo recommended that consumers seek out a zero per cent credit card deal in order to minimise expenditure and improve their debt management.

“Try and get your balances onto those credit cards to give yourself some breathing space and during that time just prepay as much as you possibly can to get that level of debt down,” he advised.

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