How to reduce the cost of your credit and store card debt

If you’re struggling to pay off card debt, there are several steps you can take in your debt management to reduce the overall cost of your debt. In this guide we’ll be giving you some of the options you may want to take in order to get on top of the situation.

In This Guide:

Pay more than the minimum repayment
Pay off the most expensive card first
Get a balance transfer card
Are there risks involved in balance transfer cards?
Repay your cards with savings

Pay more than the minimum repayment

Although paying off the bare minimum each month can make your debt seem more affordable, it can be a very bad idea. If you’re on a 0% interest rate for the introductory period, then only paying the minimum will only make inroads into your debt. This means it could then take ages and cost more to repay the balance, even if you stop spending.

Also, the fact that you’re making minimum repayments will show up on your credit file. Other creditors might assume you’re struggling with your money, and you could be refused credit in the future. It could even affect your chances of getting a mortgage. Instead, you should try and repay as much as you can afford. Even a small increase can make a noticeable difference.

Pay off the most expensive card first

Store cards tend to be more expensive than credit card debts, so try and pay these off first. Of all your cards, pay off the one with the highest interest rate first. You can check each card’s interest rate on your credit card statements.

But don’t neglect your less expensive cards - you should at least pay the minimum payment on all of them (even if you have a 0% deal), or you’ll be charged penalty fees. You could set up a direct debit, to make sure you never miss a payment.

Get a balance transfer card

Provided you have a good credit rating, you might be able to move your current credit card balance to another one, offering a lower or even 0% deal. There is normally a fee to pay, which is usually 1.5% to 3% of the balance transferred, but it can often be worth it.

Are there risks involved in balance transfer cards?

You need to make sure you’re getting a good deal when you transfer your balance, so make sure you shop around on various websites, and phone different card issuers. You should always ask the lender for a quote before applying. If they need to do a credit reference agency (CRA) check, make sure you ask them to do a ‘quotation search’. Unlike an ‘application search’, this doesn’t leave a mark on your credit file. Too many application searches in a short period can make it look like you’re desperate for credit, and thus negatively affect your credit rating.

Don’t apply for a balance transfer card until you’re sure that it’s right for you. Read all the T’s and C’s carefully and compare the interest rates and charges with other providers. It might be a good idea to close your old card accounts and cut up cards, to stop you from being tempted to keep spending. If you’re going for a 0% deal, make a note of when the introductory offer ends, and aim to pay it off before that date if you can. Also, avoid spending on your balance transfer card, as any purchases you make won’t be included in the 0% deal.

Repay your cards with savings

Use your savings to repay high-interest or expensive card debts if you can, to stop them from getting bigger. You may lose interest on your savings, but this could save you more money in the long run.