Top tips to help you pay off your credit card
Clearing your debt can feel great, especially if you’re juggling a few different payments. Here are some things you might want to think about when you’re planning on paying off credit card debt.
1. How much can you afford?
The first and most important question to ask yourself is how much you can realistically afford to pay back each month. Make sure you have enough in your budget to cover your credit card payments but also for your essentials and other commitments.
2. What are minimum payments?
Your minimum monthly payment is the smallest amount of money your provider expects you to pay back each month. If you have the budget, you can pay back more than your minimum payment. In fact, you can pay the whole balance on your card, if you want to. If you pay off your monthly bill in full, you could pay a lot less interest overall.
Not sure how much you might be able to save by increasing your monthly payments? Find out with our credit card repayment calculator.
3. Direct debit payments
To protect yourself against forgetting to pay the minimum amount on your credit card each month, you might want to set up a direct debit. This could be a handy way to make sure you keep up to date with payments. A late or missed payment will likely come with a fee or you could lose out on any promotional offers on your card. It may also impact your credit file.
A monthly direct debit could be for a fixed amount, the full balance, or the minimum payment. If you’re not sure you’ll have enough money in your account to cover a direct debit, you can pay your credit card manually instead. Check out the different ways you can pay a Tesco Bank Credit Card.
4. Your debt vs. savings
It’s a good idea to try and have a little bit of money put aside for a rainy day, but if you have credit card debt, you might be cancelling out some of your good work.
Keep in mind that you are charged interest on any credit card balances that aren’t covered by 0% promotional periods, and it’s normally more than the interest you might earn on a savings account. When that’s the case, it makes more sense to pay off your debt first.
5. Balance transfer cards
If you’re paying a high interest on your credit card debt, you might be able to save money by switching to a new card with a 0% interest rate. When you’re not paying any interest, your full monthly payment is used to pay off your remaining debt.
There may be a fee to switch over – normally up to 3% – so it’s worth crunching your numbers to see how much interest you’re paying and how much you might save. Balance transfer credit cards can have a 0% interest rate for a set amount of time. Have a look at what interest you will be charged when that period is up.
6. Managing debt
Is your credit card the only outstanding debt you have at the moment, or do you have additional monthly repayments to consider? Credit cards can have lower interest rates than other types of debt - for example, you may save more money by prioritising paying off a car loan with a higher APR first.
If you have a lot of different debts, you could benefit from taking out a debt consolidation loan. Depending on your personal circumstances, a personal loan for consolidating your debts could give you one simple monthly payment. This could save you paying to multiple different credit providers, which may make it easier to manage your debt. However, taking out a debt consolidation loan could mean that the repayment term for some of the debts is extended and you might pay more interest over time.
Try our loan calculator to find out what your repayments might look like each month, and how much interest you could end up paying.
The content on this page aims to offer an informative introduction to the subject matter but does not constitute expert financial advice specific to your own situation. All facts and figures were correct at time of publication and were compiled using a range of sources.