How to Pay Off Credit Card Debt

Credit card debt can quickly mount up, leaving you wondering how to pay it off. Read on to learn how you can pay off your credit card debt and the steps to take if you can’t afford the repayments.

Ruth Jackson-Kirby, Rhiannon Philps Last updated on 08 July 2022.
How to Pay Off Credit Card Debt

Credit card debt can build up very quickly if you don’t handle it carefully. Bank of England statistics showed that individuals borrowed an extra £400 million on credit cards in May 2022. This is an 11.2% increase from a year ago, which indicates that more people are relying on credit cards for their everyday spending.

If you’re one of the many people who owes money on credit cards, it’s important to manage it properly and stay on top of your repayments to avoid spiralling into problem debt.

Read on to find out how you can pay off your credit card debt, including tips on how to cut the cost of interest.

Assess how much you owe

To find out how much you owe, look at your latest credit card statement or log in to your online account.

Your monthly statement will tell you how much you owe, when it must be paid by, and what interest you will be charged if you don’t pay off the balance in full.

It will also tell you how to pay and the minimum sum you need to pay to avoid any late payment fees.

Stop your debt from growing

The simplest way to stop your credit card debt from growing is to repay what you owe in full. That way, you clear the debt and avoid any further interest charges. This could be something you choose to do by using your savings, if you have some.

You should be able to make a one-off payment to clear your credit card balance or to pay off a chunk of it.

However, clearing your entire credit card balance in one go may not be a realistic option for everybody.

If you’re struggling to pay off your credit card balance and your debt doesn’t seem to be getting any smaller, it makes sense to stop using your credit card. Even if you only stop using your card for a short period, this will allow you to focus on paying it off.

Another way to stop your credit card debt from growing is to move it to a 0% balance transfer credit card.

These cards come with an interest-free period, which means you won’t be charged any interest on your debt for the specified number of months. Without the cost of interest to worry about, you can work to reduce and clear your debt before the 0% rate expires. You can read more about balance transfers here.

» MORE: Credit card interest rates

Try to pay more than the minimum

Credit card providers will set a minimum payment, which is the absolute minimum you have to pay each month on your credit card.

The minimum payment is usually set as a fixed sum or a percentage of what you owe, whichever is higher. This means that, as your debt decreases, your minimum payment could fall too (if it is charged as a percentage of your balance).

While it can be tempting to just pay the minimum, this won’t help you to clear your credit card debt quickly.

Let’s say you owe £2,000 on your credit card with an annual percentage rate (APR) of 18%. You have a direct debit set to cover the minimum payment each month. If you only made the minimum repayment each month, it could take you around 24 years to pay the debt off and cost approximately £2,592 in interest. This is assuming the minimum payment is charged at around 2% of the outstanding balance.

However, if you paid £50 every month instead, the debt could take almost five years to pay off, costing you just under £1,000 in interest. Double that payment to £100 and you would only need two years to clear your credit card, shelling out just £359 in interest.

Therefore, if you pay more than the minimum, it will take less time to pay off your credit card and you’ll pay less in interest.

Work out a repayment plan

To help you clear your credit card debt, you should work out how much you can afford to pay each month.

If you haven’t already, draw up a budget with all your incomings and outgoings. This will help you to see how much you can put towards paying off your credit card, while still being able to pay your bills and pay for other essentials.

You could also identify any areas where you could save money and put that towards your card repayments.

The more you can put towards paying off your credit card balance, the quicker you can clear it and the less you will have to pay in interest.

If you have a 0% interest credit card, you won’t be charged any interest for a specified number of months. This means you have until the end of this period to clear your balance and avoid paying any interest. Divide your credit card balance by the number of months left in your interest-free period to work out how much you have to pay each month (as a minimum) to pay off your card.

For example, if you owe £1,500 and have a 20-month interest-free period, you’ll need to repay at least £75 a month to clear the debt by the end of the 20 months.

Clear your balance

Ideally, the best way to pay off your credit card is to clear your balance in full each month. This means you won’t be charged any interest and you won’t have the stress of credit card debt hanging over you.

You can normally set up a direct debit to pay off your full balance each month which ensures you won’t accidentally miss any payments. Just make sure you always have enough money in your bank account to make the payment.

Transfer your balance

If you’re paying interest on your credit card, you could save money by moving your debt to a 0% balance transfer credit card.

You may be able to consolidate debts from more than one credit card on to a balance transfer card, as long as you don’t exceed the credit limit.

You typically need to pay a balance transfer fee to move your balance from one card to another, but the money you could save on interest may outweigh this cost.

0% balance transfer cards won’t charge any interest for a specified number of months, which can give you some breathing space to concentrate on reducing what you owe. As long as you pay off your credit card before the end of this period, you won’t need to pay any interest on your balance.

Bear in mind that you are likely to need a good credit score to qualify for the most competitive 0% balance transfer cards.

» MORE: What is a balance transfer credit card?

How can you clear your credit card debts faster?

There are two ways to speed up how quickly you can clear your credit card debt.

  1. Increase your repayments: The more you repay each month, the faster you will clear your debt.
  2. Lower your interest rate: Transferring your balance to a credit card with an interest-free period can help you to clear your debt faster as interest won’t be adding to what you owe.

Better still, if you can afford to do so, pay off your credit card balance in full each month to avoid paying any interest or building up debt.

If you have debts across multiple credit cards, or you have other debts to pay, it can be hard to know how to tackle them all and how to prioritise them.

Make a start by listing all your debts, including how much you owe and the interest being charged.

If you’re behind on any payments on loans that are secured against your house, you should prioritise clearing this debt as it could have serious consequences if it’s not addressed. Equally, if you’re behind on rent or any utility bills, you should pay these off first.

Other debts to prioritise include council tax, TV licence, income tax, child maintenance and court fines.

Once priority debts have been paid, it will typically make sense to focus on paying off the credit card (or other debt) that has the highest interest rate. By prioritising the most expensive debts, you can reduce the amount of interest you need to pay and so have more money available to pay off any other debts. This approach is sometimes called the debt avalanche method.

As everyone’s situation will be different, make sure you look at all your debts and your financial circumstances to decide the best approach for you.

Even if you’re focusing on paying off a particular debt, it’s important that you still pay at least the minimum payments on all your other debts. If you miss a payment, you could face penalty fees and your credit score could be affected.

Should you save or pay off your credit card?

Only you can work out if it makes sense to use your savings to pay off your credit card.

You should consider the interest you are earning on your savings and the interest you are paying on your credit card debt to help you decide.

In many cases, you are likely to find that you are paying more in interest on your credit card than you are earning from your savings. In this situation, the money you would save by reducing your credit card debt could outweigh the return you would get if you kept that money in a savings account.

However, you should consider how much money you want to have available in your savings, as an emergency fund, for example. Think about your overall financial situation before making any decisions.

What to do if you can’t afford your repayments

If you are struggling to make the repayments on your credit cards, you should speak to your card provider as soon as possible. It may be able to help you find a way to make things more manageable. For example, this could be by:

  • helping you draw up an achievable repayment plan
  • lowering your repayments
  • offering you a payment holiday

If you live in England or Wales, you may be eligible for a breathing space. This is a 60-day period during which you won’t be charged any interest or fees on any qualifying debts and any enforcement action will be paused. You will still need to make payments on your debts, but the breathing space could give you time to work out the best way to tackle your debts without worrying about interest charges spiralling out of control.

You can’t apply for a breathing space yourself. You will need to seek help from a debt adviser who will decide whether it is the right step for you.

Scotland has a similar Debt Arrangement Scheme but there is no equivalent in Northern Ireland.

You can get debt help and advice from organisations such as StepChange or Citizens Advice.

» MORE: How can debt charities help you?

Image source: Getty Images

About the authors:

Ruth is a freelance journalist with 15 years of experience writing for national newspapers, magazines and websites. Specialising in savings, investments, pensions and property. Read more

Rhiannon is a financial writer for NerdWallet, with a particular interest in personal finance and insurance guides for consumers. Read more

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