Paying Off Credit Card Debt
Getting swamped in credit card debt is not a pleasant experience and is all too easy to do if you’re not careful.
Follow our guide to paying off any credit card debt you already have and to keeping on top of it in the future.
In this guide:
Review Your Finances
The first thing you’ll need to do if you find yourself in credit card debt, however deep, is to sit down and work out exactly what you owe.
Go through all of your card statements and on a rough bit of paper or on a spread sheet on a computer, collate all of the important data, from monies owed to minimum monthly repayments.
You can then use this data to work out a rough, self-imposed repayment plan that you should stick to.
Start by paying off the minimum amount due each month – this will help keep your interest rates low and stop your debt growing wildly.
You should use any extra funds you have at your disposal to start paying off the highest interest debt first, and then focus on keeping your general household budget in check so that you’ve got enough to maintain repayments on your other cards if you have any.
Always Keep on Top of Minimum Repayments
Credit card companies will generally require you to pay off a minimum portion of your debt each month in order to keep your interest rates down. If you don’t already know what minimum monthly repayment is required by each card, you’ll be able to find out by looking at your card bill or statement.
Keeping on top on these monthly minimum payments will cut down the interest you owe and will generally serve to keep your debt at a manageable level.
This also has the added benefit of maintaining your credit score, which is important for any credit you wish to take out in the future. It is, therefore, worth prioritising these monthly payments, even if it means cutting down your budget elsewhere.
Pay Off Higher Interest Debt First
Rather simply, if you’re looking at reducing multiple debts, you will want to start with the debt that comes with the highest interest rates attached.
If one of your credit cards comes with a higher APR than the others, then you should prioritise paying off the debt associated with it over the others. Doing so will, at the very least, slow down the growth of your debt over time.
Any spare funds you begin to acquire as a result of the high interest debt being paid off can then be put towards paying off the next highest interest debt, and so on and so forth.
Lower Your Interest Rates
Once you’re on top of your debt with a particular credit card company, you should get in touch with them to negotiate a reduction in your interest rates.
Often they will agree to cut the rates they are charging and if they don’t, you should consider switching to a different card company altogether to see what improved rates you could be benefitting from.
In order to see what kind of representative rates you could enjoy, head over to our credit card comparison page and have a look at the various products on offer from the various market-leading card issuers that we compare.
General Financial Planning
The final step to cutting down existing credit card debt, as well as preventing any future debt, is to work out a solid monthly budget that you can stick to.
This will involve generally reviewing your household finances, comparing your income to your expenditure and reducing or removing any unnecessary or excessive outgoings.
If you have multiple credit card accounts open, then you might want to have a real think about whether or not you actually need all of them. If you can consolidate your spending onto fewer cards, then you have less of a chance of accruing too many separate debts. If you have any reward based credit cards, then by spending more on them and getting rid of any unnecessary cards you could benefit from the various perks offered, like free international flights.