Credit card debt

How to pay off what you owe

Whether you’re in store or online, buying big or just picking up the day-to-day shopping, a credit card could be a convenient way to pay.

It’s safe and secure, lets you spread the cost of major items over a matter of months, and could help you to build up a healthy credit history if you repay on time. Whenever you use it, the amount you spend is added as debt.

Every month you’ll get a statement – this will show you your card balance, which is the total amount you owe, and give you a choice of ways to repay. Clear this balance each month, and you won’t have any interest to pay. If any debt is left unpaid on the card, then you’ll be charged interest on it. 

Over time, this can build up and become expensive if you pay back the minimum.

If you’re struggling to repay what you owe on a credit card, it could be time to review your money habits – and see if you can pay down the debt.

Signs you may be heading for difficulties include:

  • having several credit cards where you only manage to pay the monthly minimum 
  • regularly using a credit card to pay for daily expenses because you don’t have enough money in your bank account to cover them
  • already being close to your card’s spending limit

If you recognise any of the above in your spending, the steps below could help you to start to take greater control.

It’s never been so important to be able to look after your money, with the rising cost of living putting huge pressure on household budgets. Here’s a step-by-step guide to how you could reduce what you owe.

1. Add up what you owe and check how much it costs

Begin by totting up everything you owe on a credit card. Once you can see the total size of your card debt, you’ll have a starting point for action. It’ll also show you how much you owe compared to your take-home pay, and give you an initial idea of whether you may be able to quickly raise the amount you repay each month.

Use your statements, app or online banking to work it all out. If you’ve got more than one credit card, jot down how much you owe on each, and what you repay each month – e.g. is it the minimum or a fixed amount? Finally make a note of the interest rate for each card you have. This will help you to start paying down the most expensive debt in the next step.


2. Aim to pay off your most expensive debts first

If you own one credit card, you can skip to step three straightaway. But if you’ve more, list your card debts in order – highest interest rate at the top. Now you can see which plastic costs you the most and you can start to pay it off as a priority. 

For example, say you have two cards each owing roughly £800. One is on an introductory interest rate of 0%, and the other at 22%. In this case, it’ll make sense to clear as much of the £800 card debt charging 22% interest ahead of the rival card that doesn’t cost you a penny in interest.

Although paying off your priciest debt first is important, be sure to keep on meeting minimum payments on the others. Missing a card payment can not only damage your credit score or introductory interest rate, you could also pick up a penalty fee.

Then, when you’ve paid off the card with the highest interest rate, you can switch to repaying the second most expensive and so on. 

3. Are you just repaying the minimum? Set up a fixed monthly sum instead

The ‘monthly minimum’ is the smallest amount you can repay on your credit card bill. It’s typically somewhere between one and five per cent of what you owe, or often a low set figure such as £5 or £10 (depending on how much you owe, of course). 

Paying the minimum can be a helpful way to look after your debt if you’re struggling one month, or need to use your cash elsewhere. But if it becomes a regular habit, the interest can begin to build up. And the longer you take to pay it all off, the more it can cost you overall.

To avoid this, make a fixed payment – as much as you can above the minimum amount – each month. This will help to pay down the debt more quickly. And if you can, set up a direct debit for your credit card payment. It means you won’t forget to pay or miss a payment, and can get used to the new higher amount of money leaving your account every month.

4. Got savings? They could help pay down your debt

It may be a big ask to dip into your savings to help pay off debts, but it can be a very effective way to reduce what you owe. 

This is because – in most circumstances - the cost of your debt is usually much higher than savings interest. Say you’re earning 1% interest on savings of £1,000. At the same time, you’re paying 18% interest on a £1,000 credit card. Pay off the card in full and you’re immediately £170 a year better off.

5. A 0% balance transfer card or consolidation loan could help cut costs

If you have a lot of card debt at a high rate of interest, a balance transfer credit card could help you cut the amount you pay in charges. 

A 0% card would see you pay no interest for a set period (often a number of months). This would mean more of your monthly repayment can go towards paying off the original debt.

You’ll usually need a healthy credit score to get one, though, and there may be a transfer fee of around 3% when you apply. (If you have a less robust credit score, it could instead be worth trying for a ‘low interest’ balance transfer card with a rate that’s at least lower than the one on your existing card.) 

Alternatively, a debt consolidation loan could help to reduce your card interest charges. 

As with a balance transfer card, the idea is to switch your high-interest debt to a cheaper rate – but this time in the shape of a loan.

The new loan would then be repaid over a set amount of time – five years, say – in fixed monthly payments.

As a rule of thumb, the interest rate for any loan would depend on your credit score, how much you wanted to borrow and over how many months.

6. Struggling to repay? Please get in touch

If you can, always try to meet the minimum repayment on your credit cards each month. This way, you can avoid missing a payment (which could damage your credit score) and prevent you picking up fees if you fall behind and end up further in debt.

But if you’re having problems paying your credit card bills, we may be able to help. First, it’s vital to get in touch and tell us what’s happening. Then we can listen and see what we can do to help support you.

You can also ask for guidance on debt and repayments from debt charities and other advice bodies including National Debtline, Citizens Advice and Stepchange.

We are not responsible for, nor do we endorse in any way, such third-party websites or their content. If you decide to access any of the third-party websites, you do so entirely at your own risk.