Paying off credit card debt
Paying off credit card debt is essential if you want to avoid paying large amounts of interest.
The greater your credit card balance is, the more you’ll end up paying in interest, so if possible you should try to keep your balance to a minimum, and only use your credit card when you know you’ll be able to pay the balance back at the end of the month (or whenever you get paid).
Missing payments can result in costly charges being added to your account – if you add these to the interest that you already owe on the card, the amount of credit card debt you’ve got can build up quickly.
Ways to help pay off credit card debt
If you’re struggling to pay off credit card debt, try some of the following strategies. These can help to take the stress out of your situation as well as help clear your credit card debt.
Look at your incomings and outgoings
The first thing you should do if you’re in credit card debt is to look at your incomings and outgoings. Once you work out how much money you’ve got left at the end of each month after you’ve paid for everything you need to, you’ll know how much you can put towards your credit card debts each month.
Could you change your spending habits?
Even small expenses add up. Changing what you spend money on here and there during the week could significantly increase the amount you pay towards your credit card debt each month.
Look at areas where you might be able to cut back, too. Could you spend less on food at work, or eat out less? Could you spend less on tobacco, if you smoke, for a few months? Cutting back on a few non-essential expenses can really help to increase your surplus at the end of the month.
Sticking to a budget
Ensuring you stick to a budget is key to paying off credit card debt.
Working out how much you can put towards your debts each month after all your expenses are accounted for is the easy part – sticking to it month-to-month can be difficult! Resisting the temptation to spend and sticking to your budget, however, is what’ll get you free of credit card debt once and for all. You can download our free budget planner to help you do this.
Credit card minimum payments
Whenever you use a credit card to purchase items, you’ll have a minimum monthly amount you’ll need to pay off the card’s balance. Whilst there’s nothing technically wrong with doing this, paying the minimum amount on your card over a long period of time can cause you to fall into something called persistent debt.
Persistent debt is defined as paying more in interest and charges than your card’s actual balance for a period of 18 months or longer. It’s important you don’t fall into persistent debt as this can result in you paying large amounts of money in interest and charges – if you can, it’s much better to pay above your card’s minimum payment so you can clear your balance and prevent this happening.
Paying off credit card debts to multiple lenders
Being in debt to multiple credit card companies can be overwhelming, but there’s methods you can use to help you stay in control and get your debts paid off.
The snowball repayment method is great for getting rid of your debts quickly. It works by paying the minimum payment on all of your credit cards except the one that’s the smallest.
Put as much money as you can towards paying off the smallest credit card debt you’ve got, then work your way up. With every debt you pay off, you’ll have more money to put towards the next one, meaning that as the debts become larger you’ll be able to pay them off quicker.
Many people feel that this is a great method if you’re overly stressed about your debts, too, as seeing the amount of lenders you’ve got become gradually smaller can be a great psychological boost.
If you’d rather pay your debts off over a longer period of time, but pay as little interest as possible, then the avalanche method could be a good solution for you.
With this method you target the debts with the highest interest levels first rather than the debts that are the smallest. Doing this means you’ll pay off the debts that are costing you the most money in interest first, and while it might take you longer to pay your debts off, it means that you’ll pay less in interest than you would if you used the snowball method.
Using a balance transfer can also make paying off credit card debt a bit easier.
This involves transferring any existing debt you have to a card with a lower (or even 0%) interest, allowing you to pay less interest and pay the debt off quicker. The problem with this is that these cards only tend to be available to people with good credit scores, so you might find that balance transfers aren’t an option for you if you are struggling with debt.
What’s more, some credit card providers might charge you a one-off amount for transferring your credit card debt to a different card, so be careful to check any terms and conditions before agreeing to a balance transfer.
Can debt solutions help with credit card debt?
Paying off credit card debt can be difficult, and many people find that a debt solution can make getting rid of debt much easier. Here’s a few different debt solutions that could help if you’re struggling with credit card debt.
Debt Management Plan
A Debt Management Plan (DMP) is an informal agreement between you and your creditors that allows you to merge all of your credit card debts into one single, monthly payment. This monthly payment is often less than the amount you’ll be paying now, enabling you to pay off your debts at a more affordable rate, albeit over a longer period of time.
Debt Relief Order
Another way of dealing with credit card debt is with a Debt Relief Order (DRO). To be eligible for a DRO, your total debt has to be lower than £20,000.
If you don’t own a property, a vehicle or other assets over the value of £1,000, this might be a good choice for you. In a DRO, you will pay a fee of £90, which is charged by the Insolvency Service. The DRO period usually lasts a year, after which your credit card debt – and any other debts included in the agreement – will be written off.
You can speak to one of our kind, compassionate debt advisers confidentially by calling 0800 280 2816 between the hours of 8am to 8pm Monday to Friday, and 9am to 3pm on Saturdays. You can also get a personalised debt solution by using PlanFinder, our online debt solution tool.