Credit card debt is easy to get into but can very difficult to resolve. There are various options available if you find that you are struggling to pay your cards.
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The best way to manage credit card payments
If your credit card balances are going up not down each month, its time to take action to prevent a more serious debt problem. First put them in order of interest rate charges. Knowing which is charging the highest percent and which the lowest is the first step to getting them under control.
Check to see if you can transfer the balances of high interest cards to a 0% deal. If you can swap to a card with no interest, the balance will be paid far more quickly. This option will only be available if your credit rating is good.
It you have multiple cards, the key is to focus on one at a time. Maintain the minimum payments on all the cards but identify the one which charges the highest interest. Focus on overpaying that one as much as you can each month. Once it is paid off start on the one with the next highest interest rate.
If you are trying to pay off your credit card debt it is important to stop using them. Take them out of your wallet or purse and cut them up (or put them in a draw).
Should you consolidate credit card debt?
Consolidating your credit card debt with a bank loan can be a good way of paying it off. The interest charged on the card will be far higher than that charged on a loan. You will therefore pay the debt off much faster.
Generally speaking you will also end up with a lower monthly payment. In this way consolidation can help if you were struggling to find enough cash each month to maintain all your payments.
However, and this is critical, you must make sure you can cover all your card debt with one loan. In addition the new payment must be affordable. If the payment is greater than the amount you can afford you could end up continuing to use your cards.
Consolidation will only be an option for you if you have a good credit rating. If it is already poor and you are missing payments you need to consider a debt management solution.
Use a debt management solution
There are three main situations where the strategies for paying off your credit card debt highlighted above won’t work:
– You can’t afford to pay any more than the minimum payments on all your cards each month.
– Your credit rating is poor so transferring balances to zero interest and getting a consolidation loan is not an option.
– You cannot get a large enough loan to pay all your card balances and / or you would be unable to pay the new loan payment without continuing to use the cards.
In these circumstances you should think seriously about whether it would be sensible to use a debt management solution. There are different options to chose from depending on your circumstances.
You may simply need a short term breathing space until your income improves or some money you have been waiting for comes in. If so a debt management plan might be sensible. An IVA or even bankruptcy might be better if the problem is more deep rooted. Speak to a debt expert for advice on which is best for you.
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HI. I have £16.000 debts in credit cards I have lost my job due to covid19. I need advice what to do either go into debt management or try and ask the credit cards to give me extra time to pay. I am 71 year old I get a pension of £192 per week
Hi Lottie
Given your age I will assume that you may not get back into work and may have to rely on your pension from now on. If that is true then extra time to pay will not really help you because your income is unlikely to improve significantly in the future. I would also assume that most if not all the income you have outlined is used up paying for your monthly living expenses leaving little or no surplus income to repay debts.
If you are able to afford a payment of at least £100/mth you could consider a debt management plan or an IVA. On the face of it an IVA would be best as you would only have to pay for 5 years. After that any outstanding debt would be written off.
However both these solutions would be a be far from ideal if you are still struggling with the £100/mth payment. If so, and if you are living in rented accommodation, bankruptcy or a Debt Relief Order might well be better options to consider because they would not require you to make any further payments towards your debts.
Before making any kind of decision on what to do, I would strongly recommend that you speak to a debt advisor. I know that is not an easy thing to have to do but you need to understand the implications of all the options in the context of your circumstances.
I would be happy to have a chat with you if you like. Please give me a call on 0800 077 6180 whenever you are free.
I have problem with uk credit cards, not resident in uk, but uk tax payer for pension. Wht can I do?
Hi TeresaP
If you are not resident in the UK, you can’t use the formal UK debt solutions such as a debt relief order or an IVA.
Therefore, the option you would need to consider is a debt management plan (DMP). This would enable you to reduce your UK credit card payments into one affordable amount.