We use cookies to help us improve and protect our services. By continuing to use the site, you agree to our Privacy and Cookies Policy
Last updated on 3rd of September 2021

How To Clear Your Credit Card Debt (Expert Advice)

Taking control of the situation as quickly as possible can make an enormous difference in clearing your credit card debt. Simply seeking out some professional debt advice can help you get back on track with your personal finances...

When you have outstanding credit card debt as a loan, it isn't unusual to have worries about paying it off.  But card debt isn't going to go away, so you can't ignore it. Too many people fail to get debt advice when they're struggling to pay the minimum payment on their credit card. This can result in them having to miss a payment, face a late payment fee, incur higher interest charges and see their good credit score plummet.

Taking control of the situation as quickly as possible can make an enormous difference in clearing your credit card debt. Simply seeking out some professional debt advice can help you get back on track with your personal finances and free you from the worry of unpaid bills.

Will having debt on my credit card affect my credit score?

Having credit card debt, per se, isn't necessarily a problem when it comes to your credit score. But it does present some potential issues like any loan.

Using your credit card for spending will actually give your credit history a boost! This is as long as you regularly make at least your minimum payment to the credit card company each month and keep your credit card balance well below the total amount of the credit limit that the credit card company has set for you.

The problems arise when you end up overspending on your credit card. Many credit cards are expensive as they come with a high interest rate. This means that your credit card debt can mount up quickly as the interest increases on your outstanding debts.

This can lead to problem number two - not being able to make your minimum payment to the credit card company every month. If you start missing credit card payments, you'll not just be subject to late charges and fees, but your credit rating will also take a hit.

A low credit rating will have long term repercussions. Not only will potential creditors view you as a risk that will leave you struggling to take out new loans and credit cards in the future, but when you are offered credit, you'll only be given a low credit limit. This means you won't be able to borrow much money, and you'll almost certainly be subject to the highest interest rate.

With this in mind, it's clear that good money advice would be that, while not all credit card debt is necessarily a bad thing, it's something that needs to be under control. Credit cards, used wisely, could help you to budget more effectively, but you must clear your balances in full every month to avoid the credit card company being able to charge interest on your account. If you can't pay your balance off in full each month, you need to pay at the very least your minimum monthly payments to save yourself from being charged an extra fee and additional interest and to avoid your credit rating from taking a nosedive.

When do you need to pay off your credit card debts?

An obvious piece of debt advice would be to pay off the entire debt on your credit card as quickly as you can. Most credit cards charge on spending, so the faster you can pay the debt off, the lower the amount you'll pay overall and the quicker you'll be rid of the loan.

Of course, this is a somewhat simplified view. Many people cannot afford to pay off their entire credit card balance in full straight away, especially if they are struggling financially or have multiple credit cards with high interest on each monthly payment to pay off. So some rather more realistic advice might be more helpful.

First, you need to take a complete overview of your financial situation. You need to look at your income and your spending, as well as all of your debts, including any other loan. You can then prioritise making repayments on the credit card that has the highest interest rate.

If you have more than one credit card with a balance to clear, you need to make paying off the one with the highest interest rates first your top priority since this one will cost you the most money in the long run. If you aren't sure which one is charging you the most, you can check your monthly card statement or contact your creditors to find out.

When you know which credit card is charging you the most interest, you should focus on paying off as much of the balance on that card each month. This could save you a substantial amount of money. However, that doesn't mean you can overlook your other credit card bills. You still need to carry on making your monthly minimum payment on all your other credit cards, too, or you'll still have financial problems. Your creditors will still charge you a fee for every late or missed payment, and you'll still damage your credit record.

Once the credit card with the highest rate has its balance cleared, it's time to switch your focus to the credit card with the next highest rate of interest.  Following this financial advice will give you a clear method of managing your budget and help you pay off your debts while paying minimum interest.

How could I clear my card debts quickly?

Many people who have a significant amount of debts on their cards look for free advice about how to pay off their accounts as quickly as possible. Of course, the answer to this varies for everyone depending on their income, savings, and how much they are struggling financially and how much money they owe overall.

If you have any excess money in your savings account or current account, you may be able to use this to get your debts paid off quickly. This will only work if you have plenty of spare money in your bank accounts, though, or if you only owe a relatively small amount of cash.

You need to have sufficient money in your bank account to afford to pay your bills like your mortgage or rent, as well as other household expenses and personal costs. You also need to ensure you can afford your repayments on any loans you may have. If you have any additional money left over once those payments are made, you should use it to start clearing your debt by making substantially more than the minimum payments on your card each month.

Unfortunately, not everyone has surplus money to put towards their debt once their essential payments have come out of their bank. If this applies to you, you need to try to budget more efficiently so you can start paying off what you owe in small increments. Often, minimum payments are set at a low level, so if you can afford to pay more than this low payment each month, you'll be able to pay the card debt off more quickly and save interest too.

If you're finding it difficult to keep up with your card repayments, you may be able to get an interest free balance transfer credit card. These cards offer great benefits for anyone with existing debt on a card with a high APR (annual percentage rate). You could move the debt from that card to one that is free of interest for a certain period of time - sometimes this could be as long as 2 years, or maybe even longer - and so you'll pay no additional charges on top of the actual debt. There will usually be a fee to pay (around 2-3% of your overall debt to be transferred), but it's often worth paying this as the zero rate means you'll save money overall on your payments.

Although a 0% annual percentage rate (APR) balance transfer card could offer benefits, it's important to use it wisely. For example, don't use it for taking out cash or to pay for purchases. Use it to clear your debt balance and that alone.

Can I reduce the interest on my debt?

If you have a poor credit history, you may be unable to get an interest-free balance transfer card to enable you to move your debt and reduce the money you spend on payments. But that doesn't mean you're stuck paying a high APR on the money you owe.

Look into taking out a new card that offers a lower interest rate than your existing card and offers benefits. Transferring money from one card to another can help you consolidate your debt and reduce the amount you have to pay overall.

Could a loan help?

Another alternative is to take out a personal loan to cover the entire amount of money you owe on your cards. A personal consolidation loan will bring your debt under a single umbrella with just one payment to make each month allowing you to take control.

Personal loans with a longer term (for example, 5 or 10 years) will probably have a lower rate, making the amount you have to pay each month relatively low. This will make it easier to afford to pay your debt off, although it may take longer to do this overall.

A bank loan with a shorter term (for example, 6 months or 1 year) will come with a higher rate, but you'll clear your debt more quickly and have less to pay back overall.

If you decide to get a personal loan to cover your debt, hide or cut up your cards to prevent you from using them to build up any more debt.

I've received a letter about my debts - what do I need to do?

If you can't pay your loan or debt, you may have received a letter from your lender. You should never ignore it. You need to take action as soon as you can to prevent the situation from getting worse. A debt advisor can help you. This is especially important if the letter threatens to make a claim, take you to court, or warns you that bailiffs may visit you.

Sometimes, credit card companies send out letters about being in persistent debt. This applies if you have been paying off debts on your card for at least 18 months and have paid more in charges and interest than the total amount of debt that you've paid.

Your card provider will write to you in these circumstances after the debt has stood for 18 months, then again at 27 months, and once more at 36 months.

The letter will give you suggestions about how you might be able to pay your debt off more quickly. You should follow their suggestions if you're able to, but if you cannot afford to pay more than the minimum, you aren't obliged to.

Your creditor may also offer help in another way, for example, by reducing any fees you're paying.

Once the debt has been in place for 36 months, a repayment plan will be offered to you. This will tell you how to pay it off over a period of four years. If you do not agree with the plan, your card will be stopped.

If you're unable to afford to comply with the plan due to your other debts or costs, you need to speak to the company and let them know the amount you can pay. At the same time, you need to ask them to stop adding fees and interest to your account.

Companies are required to be reasonable when suggesting payment plans and options to help you manage your debt. If you believe their suggestions aren't reasonable, you should get in touch with them and let them know what you believe they need to change. If they don't agree, it's possible to take your complaint to the Financial Ombudsman.

What do I do if I can't pay my debt?

If you have taken out a loan, your debt is spiralling out of control, and you feel you can no longer pay your required payments, you need to contact your creditors to get some support and help. They could move you onto another deal or offer you a payment holiday on your account.

All lenders will have their own approach, but they are still required to be supportive if you have financial issues. Remember, though, that the support they give you - such as giving you more time to pay your debt - will be noted in your credit record.

If your debt problems are long term, you should seek free help and advice from one of the debt charities. They can talk to your lenders and work with you to create a plan for how you're going to pay your creditors.

What happens when my debt is paid?

Once you've paid off your debt, it's important to avoid getting in the same position in the future. You need to take a close look at your budget and spending habits and plan more efficiently. If impulse buying is a problem for you, think about only having a card for emergency use. If you decide to continue using your card, set a direct debit up from your bank account so you won't accidentally pay late.

Staying debt-free won't just help you financially, it'll boost your credit history, so if you need a loan in the future, you're more likely to be accepted.