How to manage credit card debt - Tips to help you get started

A young couple looking stressed about credit card debt

Over the last year, the Covid-19 global pandemic has caused monetary issues for many people, with one of the most prevalent issues being the fact that people have struggled to clear their credit card debt.

Cutting the cost of your credit card debt can be an overwhelming thing to be faced with, especially if the pandemic has rendered you with other financial issues such as losing your job, or being put on furlough.

In our guide here, we explain how to effectively manage credit card debt, and we’ve compiled a list of our top tips on the things you can do if you can’t pay your credit card bill, plus where to go if you need to obtain professional debt advice.

Paying off your credit card

In theory, the most effective way of tackling credit card debt is to simply pay off your credit card where possible.

While credit cards can be beneficial for numerous reasons such as adding an extra level of protection when making purchases online, as well as potentially obtaining cash back rewards or loyalty points, you must also be aware of racking up credit card debt as well.

What will happen if I can't pay my credit card?

There are numerous steps that will play out if you are unable to pay off your credit card.

You will likely have to pay late fees, plus increased rates in the amount of interest that you pay. You can also expect your credit rating to be negatively affected as it will show any potential future lenders that you’re not able to make your repayments on time.

If you continue to miss payments on your credit card, or you cannot make any payments whatsoever, then your credit card company will likely freeze your card so that you’re unable to use it. Your debt may also be transferred over to a debt collection agency who will then contact you to come and collect the debt.

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What is the fastest way to pay off credit card debt?

There are a few ways in which you can try and pay off your credit card debt relatively quickly.

Always pay off at least the minimum amount required

The first thing you should do when trying to clear your credit card debt is to pay off at least the minimum amount required by your credit card provider. You can then slowly start to increase your payments, but as long as you try to make the minimum amounts required, your debt should slowly start to ease.

What is a balance transfer credit card?

Another way of managing your credit card debt could be to transfer over to a 0% balance transfer card. These types of credit cards allow you to pay off your existing credit card debt by transferring over to a balance transfer card that has a lower interest rate, so that you don’t pay as much interest on your repayments.

You must try and pay off your debt before the 0% interest-free period ends, otherwise you will end up paying high rates of interest on any remaining debt.

Take out a personal loan

Personal loans are another alternative method of paying off credit card debt if you’re in extreme financial need, however these should be approached with caution and it’s imperative that you’re aware of what it entails to take out a personal loan.

If you can find a low-rate personal loan with interest rates lower than your current credit card rates, then you might want to consider taking out a consolidation personal loan in order to pay off your debt. However, you need to be aware that a personal loan is another form of debt, so you need to ensure that you can repay the loan as well as your credit card debt.

Can you go to jail for credit card debt?

In the UK, being in debt is not a punishable crime, so you don’t have to worry about facing jail time if you have large amounts of credit card debt.

While going to jail for credit card debt isn’t an option, you should still avoid getting into vast amounts of debt where possible, in order to avoid extreme financial difficulties.

How does a credit card affect your credit score?

Credit cards can affect your credit score in numerous ways. When you apply for a new credit card, the provider will carry out a check on your credit report. If the lender carries out a hard check, your score will be affected and the inquiry will remain on your report for around two years.

Actually using your credit card can also affect your credit score, particularly if you fail to make the repayments each month; you could see your score go down if you regularly miss payments.

Where to get free professional debt advice

Thankfully, there are many firms and charities that will offer free professional debt advice if you’re in a pickle with your finances and you need help to figure out how to clear your debt.

The following debt charities are there to help:

  • Citizens Advice - they provide free debt advice either in-person or over the phone.
  • StepChange Debt Charity - this debt charity offers advice or a free debt management plan (DMP) to help you tackle your financial issues.
  • National Debtline - they offer free advice by phone and can help you set up a free debt management plan.
  • PayPlan - this debt charity will provide you with a free debt management plan.
  • Shelter - this is a housing charity that can provide advice over the phone, online or in-person.
  • Christians Against Poverty - volunteers from this charity will visit you at home to give you debt advice and help you to budget better in order to help clear your debt.

When it comes to thinking about how to pay off debt, it can be quite an overwhelming situation. Ensure that you’re aware of the issues of getting into credit card debt, as well as the methods you can use to get out of it.

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