Couple credit card

How to manage credit card debt

money mondays

‘Money Mondays’ Series

Credit cards can get you out of a tight spot or help pay for things you otherwise would not be able to afford (holidays). They can also be expensive to borrow money and take forever to pay off. We contacted Stepchange, the UK’s top debt agency, to offer their guidance on a number of topics to share with you all as part of our ‘Money Mondays’ series.


How to manage credit card debt

To reduce your credit card debt as quickly as possible, try to pay it off as much as you can afford every month. The bigger your credit card balance, the greater interest will be added. Try to keep your balance to a minimum. Also, remember that if you miss payments, you’ll have extra charges added to your credit card debt. Put your repayments on direct debit so as not to miss one.

Minimum Payments

When you have credit card debt, paying back just the minimum payment each month is tempting. For example, if you owe £1,000 on your card, a minimum payment of 2% would mean paying back £20 per month. If you only pay this, it will take a very long time to repay the full amount, as you are paying the interest charges back rather than the total credit card debt. The Money Advice Service has a useful calculator on their website, which lets you check how long it would take to pay off a credit card debt. Quite shocking!

Always try to pay more than the minimum amount each month. 

Credit Card Arrears

If you don’t pay the minimum payment every month, your account will go into arrears. Your creditor will contact you to demand the missing payments be made, and if you don’t do this eventually, the account will default. Creditors will try to recover their money, so don’t ignore their letters and calls. Once you default, further action may be taken. Defaults will also be registered on your credit file.

For more information on what action a credit card provider can take to collect a debt, see what your creditors can do.

Don’t ignore calls or letters. Ring your creditor(s) and work out a repayment plan with them at an affordable price.

How do credit cards affect my credit file?

Your credit card provider will share information with credit reference agencies about how you use your card. This information will help other creditors decide how risky it is to lend money to you. How you manage your credit card is incredibly important. Not paying off your monthly balance and default notices for missing payments will hurt your credit rating.

Your credit file will show information about your credit card debts:

  • The balance owed
  • Your payment history
  • Whether your account has defaulted

Credit card providers also share extra information on your credit file that other types of debt don’t show, including:

  • Your credit limit
  • How much you’ve spent each month
  • How much money you’ve withdrawn from a cash machine each month

Transferring a debt by balance transfer

Some credit cards will let you transfer the balance from another card. Transferring debt from a card with a high-interest rate to a low or 0% interest can help you pay off the debt faster.

But low or 0% interest credit cards are hard to get if you don’t have a good credit rating. This means you can’t rely on balance transfers to deal with your credit card debts.

Look out for fees when transferring a balance. Most credit card providers charge 2-3% of the amount you’re transferring as a one-off fee. If you’re transferring a balance to take advantage of a lower interest rate, the fees may mean you save less than expected.

If you transfer a balance, cut up the old credit card and close the account. Otherwise, you may be tempted to keep spending on both cards, ending up with two debts.

Consolidating credit card debts

You can also consolidate your credit card debt by taking out a personal or consolidation loan to pay off your credit card balances. Again, be careful to check the interest rate and terms and conditions to make sure you won’t be adding to your debt or paying it back over a much longer period of time.

Use this debt consolidation calculator to determine if this option suits your situation.

If you take out a loan, always repay the credit card debt. Again, destroy the card. If you do keep spending on the card, you risk taking your debt back up to the maximum limit and, in effect, doubling the original debt.

Always remember that if you have financial problems, you’re unlikely to solve them through debt consolidation. Moving the debt from one place to another is rarely the answer if you cannot afford to pay off your debts.

Writing off debts

If you’re struggling to pay your credit card debts, don’t ignore them. If all else fails, you could consider options to help you write them off. Seek professional guidance when looking at insolvency solutions such as:

England, Wales and Northern Ireland:


Stepchange – impartial debt advice

If you’re worried about your credit card debt or looking for ways to write off debt, we recommend contacting the charity Stepchange. They’ll look at your circumstances and work out the best debt solution for your situation.

Stepchange is the UK’s leading debt charity; debt advice is also free. They have been incredibly supportive of our commitment to providing financial advice on Broke Girl in the City. Laura Rodrigues provides a supporting comment below on credit card debt.

Laura Rodrigues, Senior Public Policy Advocate at StepChange Debt Charity

“The regular use of high-cost credit, such as payday loans, doorstep loans or rent-to-own stores, to meet essential costs can severely damage the already tight budgets of people struggling to manage. This can leave them particularly vulnerable to falling into problem debt.

“Those using high-cost credit tend to be on low incomes and if, in work, they’re often in insecure jobs with irregular work patterns. This disproportionately affects women, who tend to be in part-time or casual employment more than men, particularly young women earning less on average than their male counterparts due to the gender pay gap. Furthermore, those with no credit history are more likely to be younger people or those new to the country and are less likely to be able to access mainstream credit and are therefore at higher risk of being pushed into problem debt.

“When it comes to credit cards, over 4 million people in the UK are in persistent credit card debt. Credit cards are designed to be a short-term product, but for many people, they have become an expensive, long-term form of borrowing. The Financial Conduct Authority, which is responsible for regulating lenders, should take action to reduce the number of people struggling with multiple credit cards to prevent people from falling into financial difficulty in the first place.”

StepChange Debt Charity provides free and independent debt advice by telephone and 24/7 through its online Debt Remedy tool.

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