Last updated: 23/07/2020 | Estimated Reading Time: 4 minutes

How to get out of credit card debt

Paying off your credit card debt can feel impossible, but if you formulate and follow an effective debt reduction plan, it can be easy to get going on the right path. The following advice offers you some different strategies which you can try in order to eliminate your credit card debt.

In This Guide:

• Transfer your balance to a lower interest card
• Try focusing on one card at a time
• Increase the minimum repayment amount
• Prevent more credit card debt
• Control your spending

Transfer your balance to a lower interest card

There are 2 options here. Firstly, you can transfer as much of your balance as possible to a 0% balance transfer card. These cards mean you don’t have to pay any interest on your debt balance for a set amount of time, but after this time you will have to start paying interest which may even be higher than your current interest rate.

This is a good idea if you know you can afford to pay back your balance in the 0%-interest timeframe given, but if you are not sure you can do this then it could be a risky option. Note that you will likely have to pay a balance transfer fee of around 3-4% of the amount transferred.

Transferring all your separate credit card balances to one card may also make it easier and less overwhelming to pay back. You will only have one payment a month rather than juggling multiple payments at once.

However, if you need a longer period of time to pay off your debt it may be a better idea to transfer your balance onto a low-interest card instead. With both of these cards, you will need a good credit score to be accepted. If this doesn’t work for you then read about more options below.

Try focusing on one card at a time

You need to prioritise which credit card you are paying the highest interest on first. You should try and focus on paying back as much money on this card as possible. Once you have finished paying back the debt balance on the highest interest card, move on to paying back the card with the second highest interest and so on.

It is important to continue to pay the minimum payments on your other credit cards or you are at risk of lowering your credit score further or incurring charges for late payments.

Increase the minimum repayment amount

The minimum amount you pay each month is often set very low, but the more you pay back each month then the faster you will finish paying back the whole balance. This means you save money on the interest you would have paid if you had continued to pay back at the minimum amount.

If paying more than this amount is too much for you, then try paying back the minimum amount twice a month so the payments are more spread out and manageable.

Only paying back the minimum repayments can also lower your credit score as credit companies can presume that you are struggling with your repayments. This may mean you are refused credit in the future on important payments such as your mortgage.

Prevent more credit card debt

Look over your finances and work out your monthly/weekly income. You need to write down all your monthly expenses, put them into categories and work out the minimum amount you need to spend on each one. At the same time, create a list of all your credit card debts and the interest rate you are paying on each one.

Compare these two lists. Work out which categories of your spending you need to prioritise first (e.g. accommodation, food and utility bills) and which categories you may be able to cut back on. You must prioritise paying back the minimum repayment on each credit card but after that, you can work out what left-over income you have to pay back more of your highest interest credit cards.

Consider setting up a direct debit so you never miss a payment (at the minimum amount or higher if you can). This way you won’t end up incurring charges for late payments.

Control your spending

Try not to spend more on your credit cards while you are trying to pay back the debt. It will increase the time it takes for you to pay the money back and you will end up paying more interest in the long run. Use cash or a debit card to pay for everyday essentials.

Especially if you have a 0% balance transfer card, purchases you make using your card will probably not be included in the 0% interest arrangement, so you will end up paying interest on those purchases until you can pay them back.

Make sure to track your progress. Keep an eye on how much you are spending each month and how much you are putting towards repaying your debts. Each time you check you may be able to cut back on something else or re-prioritise your spending to put towards your credit card repayments.