How to pay off your credit card debt

Credit card debt can build up quickly if you don’t keep control of your spending and the repayments on your cards. But there’s plenty you can do to get on top of it and make paying off your card balances more manageable.

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Updated 13 December 2021  | 4 mins read

Debt on your credit cards can creep up on you and end up weighing heavily on your mind.

It might be tempting to hope the problem goes away on its own, but the sooner you take steps to pay off your debts, the better off you’ll be.

Is having credit card debt a bad thing?

Used well and responsibly, credit cards are a useful tool to help you budget and manage your finances.

But if you’re not careful, they can cost you a lot of money in interest and cause you to spiral into large amounts of debt.

When you pay off in full what you owe on your cards every month, then you’ll get charged no interest.

But if you don’t pay off the full amount, you pay interest on the remaining balance, which carries over to your next bill.

Most credit cards charge compound interest which really works against you when it comes to debt.

This means you not only pay interest on what you’ve spent and not paid back, but also on the interest you’ve accrued - and this can make credit card debt snowball. If the amount you owe continues to build, it can take years to pay it all off.

Debt on your cards can also damage your credit score - something that needs to be healthy if you want access to the best financial products on the market, like competitive mortgage deals.

High balances on your credit card accounts affect your credit utilisation ratio, which is an important factor in calculating your credit score.

This ratio looks at your credit card balance compared to your credit limit, as a percentage. The lower the ratio is, the better it is for your credit score. Experts advise keeping your balance under 30% of your total credit card limits to avoid damaging your credit score.

This is another good reason to aim to pay off as much of your card balances as you can every month.

When should I pay off my credit card debt?

Put simply, the sooner you can pay off your credit card debt, the better.

It could save you hundreds of pounds in interest and keep your credit score healthy too.

Should I use my savings to pay off credit card debt?

If you have savings, then it’s probably a wise idea to use some of them to pay off your debts.

That’s because it’s likely that you’re paying a lot more in interest to borrow on your cards than you’re earning on your savings.

You might want to keep some of your savings for emergencies though.

What other steps can I take to pay off credit card debt?

If you don’t have savings and - unless you’re lucky enough to come into an unexpected lump sum - the chances are that it’s going to take some time to pay off the debt.

Try not to feel too daunted by the task ahead, though.

A tried and tested way to pay off your cards is to use the ‘debt avalanche method’ - or the ‘highest interest rate’ method.

It works like this:

  • Make a list of your credit cards based on their APR (annual percentage rate), from highest to lowest.

Your plan will then be to tackle the debt on the card that carries the highest APR first.

  • You must make minimum payments on all your other cards every month, too. But you should pay off any extra you can afford on the card with the highest interest rate. Remember, every little bit you pay off means less interest accruing on the debt.
  • When that card is paid off, start paying off extra on the card which has the next highest APR. Continue in this way until all your cards are paid off.

This method of paying off your debt means you’ll pay less interest overall.

What is the fastest way to clear your credit card debt?

Using your savings could be the quickest way to clear your debt.

If you don’t have savings, though, then look at how you could budget better and cut back on your monthly spending.

Cancelling infrequently used subscriptions or eating fewer takeaways all add up to savings you can then use to pay off your card balances instead.

You could also look at the possibility of consolidating your debts by moving the amount you owe on your cards onto a 0% interest balance transfer card.

This type of card charges you zero interest on your debt for a promotional period - usually from six months up to 22 months or more.

During this time you can concentrate on paying off as much of the balance as you can before the 0% deal ends.

Once the 0% promotional period ends, you’ll need to pay the card’s standard interest rate on any remaining balance.

This interest rate is usually high, so that’s another reason to try to clear as much of your debt as possible while the 0% deal is still valid.

You’ll need a good credit rating to get accepted for an interest-free balance transfer card. There’ll also usually be a balance transfer fee to pay that’s a percentage (usually between 1% and 5%) of the amount you’re transferring.

As long as you make your monthly payments on time and avoid using the card for purchases (you may even want to cut it up), a balance transfer card means you avoid paying any interest on your credit card debt and can reduce what you owe faster.

What happens if you only pay minimum repayments on your credit card?

You need to be sure you make at least the minimum monthly payment on your cards.

Failing to do so can harm your credit score and see you incur late payment charges too.

But minimum payments are fairly small, so you should be aiming to pay off more than this every month. That way you’ll accrue less interest on your debt and it will take less time to pay off.

In short, credit cards make best financial sense when you pay off the balance in full every month. If you can’t do that, then you should pay off as much as you can afford.

How can you cut interest on your credit card debts?

If you don’t qualify for a 0% balance transfer card, then you could look at moving your current cards’ debts onto a card that offers a lower APR.

What if you’re struggling to pay off your credit card debt?

If you’re really struggling with debt, it’s important not to panic.

Get in touch with your credit card provider to see how they can help.

They may move your debt onto a card with a lower APR or offer you an affordable ‘repayment plan’ to help you get on top of your debt.

You could also ask if they can reduce, waive or cancel interest and charges, or pause your payments for a period.

Agencies such as Citizens Advice, Step Change and the National Debt Helpline could help you draw up budget management plans to help tackle the debt.

Can you take out a loan to pay your debt?

You could take out a debt consolidation loan to pay off what you owe.

It can work out cheaper for you if the loan offers a lower rate of interest than your cards.

This will help you save on interest, possibly pay off the debt quicker and, with one repayment to make every month rather than several, it also simplifies the process of getting out of debt.

Should I keep my credit cards after I’ve paid off the debts?

Once you’ve cleared your card debts, your main aim should be to try to remain debt-free.

If you recognise that you can be a compulsive spender, or tend to overspend when you have a credit card, that might mean going without one, or at the least keeping just one for emergencies only.

If you do keep a credit card running, make sure you set up a direct debit to repay the balance in full every month.

Being debt free means you could now use the spare money you’ve been up to now using on repaying your cards to maximise financial gain in other ways. For example, you could make mortgage overpayments, which can take years off its term and save you thousands of pounds in the long run. Or you could deposit a regular amount into a savings account.

With your credit card debts cleared, your credit score should also see an improvement, which means you could be eligible for the better financial deals on the market should you need them.