How to Reduce Credit Card Debt

When used sensibly, credit cards can be a handy way to borrow money when you need it. For example, if your car suddenly needs urgent repairs and you don’t have the funds in your savings to cover the expenses, a credit card could help to tide you over or allow you to spread the cost.
On the other hand, if you do not manage your credit card carefully by keeping on top of your monthly repayments, you could find yourself in danger of falling into credit card debt.

If you’re worried about credit card debt, it’s understandable that you might have a few questions, such as how can I reduce credit card debt; can I consolidate credit card debt; and how can I pay off my credit card?
Our helpful guide explains how credit card debt can happen and includes suggestions that could help you manage the amount of money you owe.

How does credit card interest accumulate?

The amount you owe on your credit card account is called the ‘balance.' This is your credit card debt. You must pay at least a minimum amount of your balance due every month. The minimum repayment amount will vary between providers and could be charged as a set amount or as a percentage of your outstanding balance.

Any balance left over after you make your repayment will be charged interest. The lower your outstanding balance, the less interest you’ll pay, and if you repay your balance in full each month, every month, you won’t be charged any interest.

Missing or making late repayments could seriously harm your credit score and result in credit card debt. You may also be charged additional fees.

How does credit card debt happen?

Credit card debt occurs when you spend more money than you can afford to repay. If you’re not able to clear your credit card balance in full, you should try to repay as much as you can afford. Paying the minimum amount each month will mean that interest builds up over time, adding to the balance. This could unfortunately lead to credit card debt, especially if you continue to use your credit card to make purchases.

Credit card debt may also happen if you have multiple active credit cards that you regularly spend on without repaying or by only repaying the minimum amount due.

How can I reduce my credit card debt?

If you have an outstanding balance on your credit card, you might have wondered 'how can I reduce credit card debt?'
Being in credit card debt can feel daunting, but it’s important to remember that it’s never too late to start your journey towards being debt-free. There are several actions you can take to get yourself back on track.
We’ve included some pointers below to consider on how to reduce credit card debt.

• Step back from your credit card
  If you can, avoid using your credit card; give yourself a break from spending while you prioritise clearing your credit card debt.


• Set a monthly budget
  Now that you’ve got a figure to work with, it’s time to put your plan into action.
  Setting a budget can be a good way to understand exactly what you’re working with. Total up the cost of your essential monthly outgoings, including rent or mortgage, utility bills, Council Tax, and food (list not exhaustive), and subtract the overall amount from your take-home pay. The money you have left over is called your ‘disposable income’.
  The next step is to ask yourself how much of your disposable income can you realistically dedicate to paying off your credit card each month without leaving yourself short. As previously mentioned, making more than the minimum repayment amount will reduce the amount of interest you’ll be charged on your next month’s statement, which will help lower your overall credit card debt.


• Set up a Direct Debit
  Setting up a Direct Debit to pay a certain amount off your credit card each month could be a good way to keep up to date with your repayments.


• Look into different debt-clearing strategies
  If you have credit card debt on more than one credit card, it might help to work towards clearing the card with the highest balance first. If you have several credit cards with similar balances, you might choose to pay off the one with the highest interest rate. This is often referred to as the ‘avalanche method’.
  On the other hand, some may prefer to tackle the smallest debt first and work their way up, which is often called the ‘snowball method’.


• Use your savings
  If possible, is there a chance that you could use some of your savings to pay off your credit card debt? It might be a good idea to keep some of your savings aside in case of any emergencies – the last thing you want to do is leave yourself out of pocket and in a position where you may be tempted to rely on credit again in the future.
  Spending the money stored in your savings can be nerve-wracking, especially if your pot has taken a lot of time and dedication to build, but the sooner you clear your debt, the quicker you can get saving again.


• Balance transfer credit cards
  Balance transfer credit cards allow you to move the balance from one or more existing credit cards onto a new card with a lower interest rate; this could be an option to explore if you want to consolidate credit card debt. Some balance transfer cards offer an introductory period of 0% interest. You should be aware that once the promotional period comes to an end, any remaining balance will be charged interest at your standard interest rate.
  There is usually a fee to pay when transferring a balance, which should be factored into your budget; you should also make sure that the interest you will pay on your balance transfer credit card is lower than the interest you are currently paying across all your credit card accounts.


• Debt consolidation loans
  A debt consolidation loan is another option you might be interested in considering. With this type of loan, you borrow an amount and use it to clear all your existing debt(s). Similar to a balance transfer credit card, you should always make sure that the loan comes with a lower interest rate than your existing credit card(s). As well as potentially saving you money on interest, a debt consolidation loan could also make your borrowing easier to manage; rather than making multiple payments each month, you’ll only have to make one.
  Taking on new borrowing to consolidate credit card debt is a serious commitment, and you should do thorough research and think very carefully before making a decision about whether this is right for you.

How long does it take to pay off credit card debt?

The time it takes to clear credit card debt will vary, based on several factors, including how much money you owe and how much disposable income you have.

How can I pay off my credit card?

Your credit card balance can be often be repaid by Direct Debit, bank transfer, standing order or through your online credit card app; check your credit card provider’s website for all acceptable methods.

I’m struggling to make my repayments; what are my options?

If you’re experiencing difficulties making your repayments, you should contact your credit card provider as soon as you can. They will appreciate the fact that you’ve reached out to explain your situation and will be able to talk you through any options that may be available. Potential solutions will vary between providers and will depend on your circumstances but could include temporarily pausing your repayments or reducing your payment amount.

Worried about money? Help is available.

Money worries can be all-consuming and isolating. While sharing your concerns might be the very last thing you feel like doing, reaching out and asking for help is really important.
It’s understandable that you may not feel comfortable discussing your financial situation with a family member or friend, but please know that you can access free support and advice from organisations and charities, including debt solutions and the cost of living, as well as checking for any benefits you could be entitled to.

• StepChange
• MoneyHelper
• National Debtline
• Citizens Advice

The information contained in this article does not constitute advice and should not be viewed as such.
October 2024.