Get Out Of Debt
  • Write off unaffordable debts
  • Lower your monthly payments
  • Stop creditors from contacting you
  • Check My Debt Options

How Can I Get Out of Debt?

With a simple legislated debt solution you can consolidate all your debts into one lower, affordable monthly repayment. Make one set payment per month for a set period, and after the period expires any remaining debts left are legally written off. This can be up to 90% depending on your circumstances.

Banks and Credit Cards

Help With Credit Card Debt

What To Do If Your Credit Cards Are In Arrears

Many people use credit cards to buy the things that they want in stores on online, and they can pay the money back later, in instalments. If you use your credit cards wisely, they can be very useful. If they aren’t used wisely, it is a very expensive way to borrow money and it can take a long time to repay the debt. Below is advice to help you pay off your credit card debt. You will also learn how to manage your credit card debt.

What Happens If I Have Credit Cards That Are In Arrears?

Your account will go into arrears if you don’t make the minimum payment on your credit cards every month, your account will go into arrears. When this happens, the creditor will contact you to demand that you make the payment. After several calls, your account will go into default. This is where further, more damaging action will be taken. You can get more information about that in the section regarding what creditors can do to you.

Joint Credit Card Debt

According to the law, only one name can be on a credit card, therefore, joint credit cards don’t exist. However, your credit card company will allow you to get a second card with the name of another authorized user on it. If you have a second card with another person’s name on it, you would be liable for the debt on both cards. The second card holder would not be liable for any of the debt even though they were the one doing the spending. Because of this, you should think carefully before you give someone a second card.

What Happens If I Make the Minimum Payment Only?

All credit cards have a minimum amount that needs to be paid every month. The minimum amount is usually between one and three percent of the entire bill. For example, if you owe £1,000 and your minimum payment is two percent, you would be paying £20 each month. If you pay just the minimum amount due, it will take you a long time to pay off your bill. If you can afford it, you should try to pay more than the minimum amount. If you want to find out how long it will take you to pay off your credit card debt, The Money Advice Service has a calculator on their website that can help you figure it out.

Credit Card Limits

There are some credit cards that are designed for people with poor credit and they have low credit limits of around £200. These cards usually come with higher interest rates. If you make your payment on time, it can raise your credit score. This will make you eligible for cards with lower interest rates.

There are other cards that have a much higher credit limit. In some cases, this amount can be in the thousands. Whether you have a high or low limit, it is easy to run up debt that will take quite a while to pay off.

If you have a good credit history with the company, they might increase your credit limit. Before agreeing to the increase, you should think about it carefully. If you don’t need to increase, you should refuse it to keep yourself from overspending. Some people agree to the higher limit just in case they need the money, however, the temptation to spend will always be there. It won’t be long before you run up a debt that you cannot afford to pay off.

How Expensive Are Credit Cards?

Credit card interest can vary from 10 percent to 70 percent or more. The interest rate on your particular card would depend on the card that you have and your credit score.

There are some cards that offer an interest fee period for 60 days on purchases. This means that if you pay off the whole amount within the 60 days, you wouldn’t be charged any interest. There are some cards who don’t offer this option. They will charge you interest right away. If you were to withdraw money from the ATM, almost all cards charge interest right away.

Should you miss a payment, you will be charged a late payment fee on top of your interest payment. The late fee should be no more than 12 percent for each missed payment.

Pay Off the Most Expensive Card First

To save money, you want to pay off the card with the highest interest rate. If you have store credit cards, they will likely have a higher interest rate than other cards. Other than payday loans and Doorstop loans, store cards have the highest interest rates. It is important to check your credit card statement each month to make sure that your interest rate hasn’t increased. When you have determined which card has the highest rate, you should pay that one off first. While you are working on paying off the most expensive card, you still need to make the minimum payment on your other cards. Once the most expensive card is paid off, you can start making higher payments on your next expensive card, and so on.

Get A Balance Transfer Card

If you have good credit, there is a chance that you could move your current credit card balance to a card with a lower interest rate or to a card that is offering a 0 percent deal.

What is a Credit Card Balance Transfer?

Some credit card companies will allow you to transfer the balance from one card to another. If you transfer your debt to a card with a lower interest rate or 0 percent interest will help you pay off the debt quicker. Unless you have excellent credit, you won’t qualify for a low or 0 percent interest card. Because of this, you cannot rely on these cards to get you out of debt.

If you are considering a transfer, you should find out if there is a fee to transfer. Many credit card companies charge between 2 and 3 percent of the amount being transferred that would be added to balance due. If you are transferring a balance to take advantage of the lower rate, the additional fee could be saving less than you expect.

If you do end up transferring your balance, be sure to cut up the old card and cancel the account. If you don’t, the temptation to use both cards can be great, or you could accidentally start using both. This will result in two debts to be paid off.

How Does a Credit Card Affect My Credit Score?

Your credit card company is always in contact with credit reference agencies, and they report how you are using your card. This information will let creditors know whether or not it would be a risk to lend you money. Your credit card file would show all of the information about your credit card debt, the same way that it would all of your other debt. This information includes:

  • The balance that you owe
  • Your payment history (on time payments, late payments, etc)
  • Whether or not your account has gone into default

There are certain things that credit card companies report that other types of debt don’t show. This includes:

  • The credit limit on your card
  • How much money you spend on your card each month
  • How much money you withdraw from the ATM each month

What Are the Risks of Using Balance Transfer Cards?

If you are considering transferring your balance, it is important to understand the risks first. These include:

  • Each time you apply for credit, it is reported and added to your credit report. If you apply several times in a short period, lenders might think that you are having debt issues. You should avoid applying for these cards too often.
  • You should never apply for a card until you are sure that it is the right card for you. Before doing anything, you should shop around online or on the phone. If your interest rate would vary based on risk and they need to do a credit agency check before they can quote you an interest rate, you should ask the company to do a “quotation search.” This won’t be recorded on your credit report. If you do an application search, it will show up.
  • Transferring a balance could result in higher debt. It is important to understand that just because you have transferred a balance that your debt has not gone sway. You have just given yourself a chance to pay your debt faster. When you transfer cards, make sure that you close out the old account and cut up the cards. This will avoid giving into temptation and making costly errors.
  • The 0 percent deals do not last forever. It is very important that you make a note of when the introductory period will end so that you can pay off as much of your debt as possible during this time. If you don’t take advantage of it when you can, you will have transferred the balance for nothing.

How Can I Reduce My Debt?

If you have store cards or credit cards, there are a few ways that you can reduce your costs.

  • You should pay more than the minimum payment each month. If you pay just the minimum amount each month, it makes the debt seem affordable, however, depending on when you were approved for the card. If you pay only the minimum amount, it could actually increase your debt. This is because, each month, the debt adds up, making it take longer for you to repay your debt.
  • If you opened your account after April 2011, the minimum payment that you make would need to cover at least 1 percent of your outstanding balance and your interest fees. This means that you are always trying to pay off some of your outstanding debt. By paying a small amount on top of your minimum payment, you can benefit greatly.
  • Unless you have other debts that need to be paid off right away, it is a good idea to always repay your most expensive credit card debt with your savings. If you don’t handle your priority debt first, it could result in:
    • Your home being foreclosed on if you don’t make your mortgage payments
    • If you don’t pay your Council Tax, you could lose your liberty and end up in prison.
    • You may stop receiving interest on your savings, however, it can save you money in the long run. The reason is because you will end up paying much less interest on the debt that you owe.

Find Out if You Are Paying for Payment Protection Insurance

You should check if you have been paying for payment protection insurance without even knowing it. This can result in you losing hundreds of pounds which could be refunded if you file a complaint and it is successful. For more information regarding filing a claim for missold payment protection, you should read our guide.

Be Careful When Using Your Cards

When you are using your credit cards, you should follow a few general rules to keep you from getting into financial trouble.

  • You should make sure that you pay at least your minimum payment every month. It is better to pay more than the minimum payment. If you miss a payment, you would need to pay a costly penalty. If you have a card with a 0 percent deal and you don’t make at least the minimum payment, you could lose the 0 percent deal. As long as you are making the minimum payment, your creditor should let you make a Direct Debt payment.
  • You should always study your monthly statement carefully. You should check for any changes in your interest rate. You should also make sue that all of the charges on the card are actually yours.
  • You should avoid making cash withdrawals. When you do, you are charged a fee that is going to be higher than your interest rate.
  • If you have a 0 percent card, you should not use it to buy anything. If you don’t pay off the balance within the grace period, you will end up paying interest. It is best to use these 0 percent cards to pay off your outstanding debt.
  • When you have transferred your balance to a 0 interest or lower interest card, you should avoid using the old card. To keep you from being tempted, you should close out the account and destroy the card.