Paying off your credit card

Credit cards may be convenient, but if you don’t pay off the full amount each month your debt could soon mount up.

We look at different ways to pay off your credit card and share six top tips for smarter credit card management.

Credit cards may be convenient, but if you don’t pay off the full amount each month your debt could soon mount up.

We look at different ways to pay off your credit card and share six top tips for smarter credit card management.

Alex Hasty
Insurance and finance expert
minute read
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Posted 26 MAY 2021

Credit card interest rates

The interest charged on credit cards can leave you with a pretty big debt if you’re not regularly paying off the balance in full. The average credit card interest rate is around 20%. That’s a lot of interest if you’re only paying back the minimum each month.

If interest is building up and you’re struggling to pay off your credit card, you might want to consider some alternative ways to help cut down the interest you’re paying.

Move your debt to a 0% balance transfer credit card

One option is to move your outstanding credit card debts to a 0% balance transfer credit card.

A 0% balance transfer credit card gives you a set period when you won’t be charged interest; in some cases, for more than two years. This gives you time to pay off your outstanding balance without having to pay interest.

Just be aware that:

  • There’s usually a fee for a balance transfer – it’s worked out as a percentage of the amount you move over.
  • Once the interest-free period is up, you may be charged a higher rate of interest on any remaining outstanding balance. It’s important to try to pay off the entire balance before the interest-free period ends.
  • 0% balance transfer credit cards are usually only available if you have a good credit rating.
    You must make the monthly minimum repayments on time. A missed or late payment could result in you losing your interest-free period.

Did you know? – Credit card statistics for 2021

According to a study from Compare the Market in 2020, 21% of young people aged 18-24 rely heavily on credit cards for their everyday spending. However, almost a third (32%) don’t manage to pay off their credit card balance at the end of the month, putting them at greater risk of mounting debts.

But that isn’t where the fun credit card stats end. A report by Finder highlighted how credit card use has shifted as a result of the coronavirus pandemic. They found that, despite there still being as many as 62.8 milion credit card accounts in use, the volume of transactions had dropped by as much as 31% (88 million purchases) between January 2020 and January 2021.

The value of transactions would see a similar dip, with £10.7 billion less spent in total – a 37.9% fall from the previous year. Perhaps unsurprisingly, April of 2020 would stand out as the month where the least amount of money was spent on credit cards, with £9.36 billion spent (the lowest amount on record since February of 2009).

Interestingly, the average value of global credit card transactions has seemingly fallen over time. Figures supplied by Spendesk showed the following average cost per card payment between 2008 and 2018:

  • 2008 – £66
  • 2009 – £64
  • 2010 – £64
  • 2011 – £64
  • 2012 – £62
  • 2013 – £59
  • 2014 – £58
  • 2015 – £56
  • 2016 – £54
  • 2017 – £54
  • 2018 – £53

While this might imply declining usage, the opposite is probably true – with the smaller average figure showing how credit cards have increasingly become the norm for small, daily transactions.

And people are also being more conscious of how much they’re leaving on their balance. This figure has also dropped considerably across the past year, with the numbers showing a fall from £1,829 on average (£38.1 million total) in January 2020, to £1,591 (£34.1 million) in January 2021.

Pay off your credit card debt with a debt consolidation loan

A debt consolidation loan lets you turn multiple debts into one convenient monthly payment. Debt consolidation loans typically charge less interest, so could be a good idea if you have high-interest credit cards and other debts to pay off.

Just be aware that if you take out a secured debt consolidation loan, you could risk losing your car or home if you can’t keep up with the repayments.

Use savings

Consider using any savings you have to pay off your credit card balance, rather than paying the minimum each month as part of your monthly spending.

Set yourself a monthly budget

Setting yourself a monthly budget is a great way to take control of your spending. It also gives you a chance to see where you can tighten your belt and make savings.

By making small changes to your monthly outgoings, you could use the money you save to help pay off your credit card debt.

Pay off the most expensive card first

If you have more than one credit card, concentrate on paying off the card that charges the highest amount of interest. Just remember to keep paying at least the minimum monthly payment on the other cards.

Pay by direct debit

By setting up a direct debit to pay your credit card, you won’t have to worry about missed or late payments. Just make sure there’s enough money in your account to cover the payment each month.

Our top tips for managing your credit cards

We’ve rounded up six ways to be smart and sensible when it comes to managing credit cards.

1. Beware low introductory rates

A card with 0% or a very low rate on new purchases, for example, can help spread repayments over a number of months. While this may seem like the answer to that pricey electronic gadget you were planning to buy, it only makes sense if you’re able to pay off the balance before the higher interest rate kicks in. Shopping around for a good credit card deal is never a bad thing; just remember to read the small print and always make sure you’ll be able to meet any repayments.

2. Avoid taking out cash on your credit card

Cash can still be convenient – and sometimes it might be the only way you can pay. But if you take out cash on your credit card, be aware that your provider is likely to charge you a high rate of interest on any withdrawals. Either put the purchase on your credit card – keeping in mind the importance of clearing any interest incurred on outstanding balances as soon as you can – or take out cash with your debit card.

3. Try to limit how many credit cards you get

While there can be benefits to taking out separate cards for different types of purchases, generally speaking, the more cards you have increases your exposure to fraud. Also, each new credit card application you make leaves a trail on your credit report history, which can make it more difficult to take out other types of credit in the short term.

With more cards, you’ll be exposed to more lines of credit and the overall amount you could borrow will be higher, meaning a bank might be less inclined to want to extend this further. The knock-on effect means it could be tough when you’re looking to borrow for bigger things, such as taking out a mortgage.

4. Be smart when paying off credit card debt early

It might sound counter-intuitive, but you need to be careful not to pay your minimum fee too early – as you could risk being charged a late fee for doing so. Let’s say you get a credit card statement asking you to make a payment by 28 June and you pay off the minimum amount owed on 20 June. On the 27 June, you might decide to pay off a bit more than is owed, rather than worry about making a payment next month.

As you’ve made two payments before the due date, the credit card company sees that you overpaid in June but didn’t pay anything in July. This sort of well-meaning miscalculation will result in a late fee and could have an impact on your credit score. So make sure you’re clear on the exact payment dates of your credit card.

5. Set yourself a percentage of your total credit limit

Banks advise on keeping a ‘credit utilisation ratio’ of under 30%. In plain English, this means that if your credit card has a limit of £10,000, then you should aim to keep your balance under £3,000. Sticking to this could help keep your credit score healthy.

6. Your balance and your credit limit are different things

It’s all too easy to view your credit limit as your remaining balance – in other words, you convince yourself that it’s the amount of money you have left to spend and forget that you’re really in debt. In the longer term this may be unsustainable, as you could spend many months (or even years) paying back what you’ve spent.

Struggling with your credit card repayments?

If you’re having difficulties paying back your credit card, speak to the card provider as they may be able to help. You can also get free, expert debt advice. Find a list of free debt advice services on the Money Advice Service website.

Managing your credit score in the age of COVID-19

The coronavirus threw most of us through a loop when it hit British shores at the start of 2020. A lot of us were left in an unfamiliar financial position, with the less fortunate of us seeing our finances taking a hit.

As we’ve discussed, paying off your credit score can be challenging at the best of times. But in the age of COVID-19, things might be exceptionally confusing. Some top advice for managing your credit includes:

  1. Contact lenders if you need help. Owing to COVID-19, a lot of lenders have policies in place which are designed to help those who are struggling to pay their bills. This isn’t a guarantee, but it’s worth checking with any lenders to find out what their rules around this are. It’s best to assume you have to make normal payments until you’re told otherwise.
  2. Check your credit regularly. It’s always smart to keep one eye on your credit score. But that becomes even more important at a time when things are a little more volatile. While you don’t need to be monitoring it every few minutes, it would be smart to check at least once a day to make sure nothing odd is appearing on your statements. If you’re prone to forgetting this, try to make it the same time every time.
  3. Budget and plan ahead more than usual. It’s more important than ever to stay on top of your finances. Make sure you create a plan for where you’re going to spend your money, and try your best to stick to it. This isn’t always possible, but having a rough budget in mind will go a long way to helping you control what is and isn’t coming out of your account.
  4. Get financial support if necessary. Financial channels exist to help you manage difficult monetary situations. You can talk to credit card counsellors, who will be able to guide you through any hurdles you’re facing. They won’t be able to manage your finances for you, but they should help provide actionable feedback which you can use to improve your situation.
  5. Be extra cautious of identity theft. This is something you should always try to keep in mind – but it’s even more important during the pandemic. There have been a number of cyber attacks from scammers pretending they’re banks, the government or even the NHS. Always check that any messages you receive are credible, and never click on links sent to you via email or text, unless you were expecting a message.

These are troubling times for all of us. Follow our advice to reduce the stress you feel when managing your credit score.

Tips for paying off debt during COVID-19

If you’ve found yourself in debt, you’ll want to do what you can to get out of it as quickly as possible. This might be more challenging than ever thanks to the pandemic, which has made finding spare money a real challenge. If you’re worried about paying off debt in the age of COVID-19, make sure you keep these top tips in mind.

  • Pay off debts before saving. It might seem tempting to start putting money away for the future, but unfortunately it’s probably best you use that money instead to avoid the high APR interest charges which come with credit card debt. These currently average out at around 22.5% in the UK. While it’s clever to put a little bit of money aside for emergencies, it’s best to focus on cutting out your debt before building a house or holiday fund.
  • Check your tax code. Your tax code is what decides how much tax you pay on your monthly salary. If you’ve been placed on the wrong code you might be paying more in tax than you should be. This is something you can quickly check, to make sure you aren’t missing out.
  • Consider your food shop. If you buy a lot of big-name brands when you shop, think about cutting expenses by trying out the supermarket brand products. While you might not like all of them, you may stumble across one or two which are as good, if not better, than the more costly big-name options.
  • Cut existing loan costs. In some cases, transferring lenders on your loan might actually make financial sense. You’ll need to first work out how much you’d pay as a settlement fee, then compare that with what you’ll be saving by using a lender with a different interest rate. This will save you money in the long term, but it might not be a good option for those struggling in the moment.
  • Sell what you don’t need. Got stuff lying around the house you never use anymore? By selling your unwanted items online with eBay or Facebook Marketplace, you’ll pick up much-needed cash for items which would otherwise just be taking up room in your home.
  • Don’t neglect your mental health. Most importantly of all, it’s really key to remember not to allow your mental health to slip. Being in debt can be really stressful, so always take time to do what brings you happiness. Money management can’t be put off forever, but taking a day to yourself can be a necessity.

Useful links

If you need further help with managing credit during the pandemic, make sure you check out this list of useful links.

The government has a list of helpful advice for anyone on Universal Credit or other forms of benefits during the pandemic:

Mind provide actionable advice for anyone struggling to stay on top of their mental health during the COVID-19 pandemic:

National Insurance Direct discuss some of the worst scams targeted at consumers during the course of the pandemic:

The NHS make it easy for people to find financial support if they’re in quarantine:


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