Debt management

Should I save my money or pay off my debt?

Matthew Harris, Principal, gives you the low down on saving versus paying off debt.

The age old conundrum in personal finance – save or pay off.

Much of the UK population has had some experience with personal debt at one time or another. In fact, around a quarter of people in the UK are in debt most months of the year and according to themoneycharity (October 2019) the average credit card debt per person in the UK was £1373.

Is your debt into the thousands?
If you answered yes to this or if you're consistently in the red and finding it hard to honour all your monthly payments, then its time to start paying off. Here's why:

• Firstly, it's not going to go away
The longer you leave it the harder it will become to clear it and remember that it’s going to feel really good to see that number decreasing!


• You're losing money

Credit cards can be a great thing, but what tends to be forgotten is that most credit cards have higher interest rates than savings accounts. The simple maths means that your gain in savings is probably lower than the interest on the credit card, so it’s better to clear the debt in the long run. 


There are loads of strategies for managing and clearing debt, for example moneysavingexpert.co.uk has several you can read.

Talk to your bank
If you have issues with debt the best thing to do is call your bank and talk to them. In some cases, you may be able to agree a new payment plan with lower payments over a longer period, or potentially get a pause in repayments.