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How to pay off credit card debt
To minimise your borrowing costs and protect your credit score, it’s important to stay focussed when paying off credit card debt.
Understanding credit card debt
Credit cards are a common and convenient way to manage everyday expenses, larger purchases, to consolidate other debts, and more.
But in return for flexibility, on top of repaying what you’ve borrowed, you might also need to pay:
- Interest as a percentage of your balance.
- Fees and charges for cash withdrawals, foreign currency transactions, late payments etc.
Credit card debt can easily build up, so make sure you understand any borrowing costs in advance. And always have a plan in place to repay any credit card debt as quickly as possible.
Read on for:
Credit card repayment basics
To avoid additional fees and charges, you need to make at least the minimum payment shown on your statement each month.
But it’s recommended that you always pay more whenever you can. That will help to limit your borrowing costs and your risk of getting stuck in persistent debt.
Most card providers offer a few payment options, helping you to manage your credit card debt in a way that suits you.
It’s worth knowing that you could avoid interest charges completely if you pay off your statement balance in full every month.
Six tips for paying off credit card debt
It will take effort, but reducing your debts could help you achieve a greater sense of freedom and peace of mind. You might even find the challenge fun.
The following tips could help you to get started:
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First things first, look through your bills and statements to get a clear picture of your debt. Make sure you note down the interest rates that apply to each balance.
This is a quick and easy first step. You’ll then know the total amount you owe, and which balances are costing you most in interest and other fees.
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We know this might be tough, especially if you have bills and expenses on the horizon. But try as much as you can to limit your credit card use, at least until you’ve paid off your existing debts.
You might find storing your card away helps – out of sight, out of mind. You’ll still have the card in case there’s an emergency, but if it’s not in your wallet (or virtual wallet), it’s not so easy to use for everyday purchases.
If you manage your account using our app, you also have the card freeze option. Use it to freeze different transaction types, giving you more control over how and where your cards are used.
Lastly, keep an eye on your monthly statements so you’re aware of your balance, spending and any additional fees or charges.
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Of course you’ve got to enjoy life, but making even small changes might free up money you could put towards debt repayments. That might include shopping around to find the best deals on everyday essentials, including household utilities, groceries and fuel.
There’s a whole section of our website dedicated to budgeting and helping you with managing your money. Head over there for inspiration, tips and useful tools.
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Is your debt spread across multiple cards, loans or overdrafts?
By consolidating everything, it could be easier to keep track of your balance and repayments. Plus, if you move from a higher to a lower interest rate, you could also cut your borrowing costs.
There are a couple of options to consider:
With a balance transfer credit card, you can consolidate debts from other credit and some store cards.
Good to know:
- You can’t transfer balances between Halifax credit cards.
- Fees usually apply, so make sure transferring is worthwhile.
- You could take advantage of introductory or promotional interest rates.
With a debt consolidation loan, you could consolidate debts from cards, loans, overdrafts and more.
Good to know:
- If your interest rates are fixed, your repayments will be too, making it easier to keep track.
- Select a loan term and repayment schedule to suit your needs and budget.
- Once you’ve made all the required payments, your balance will be clear.
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You’re less likely to miss a payment and be charged additional fees if you automate your repayments.
Simply set up a Direct Debit and your payments will be collected from your selected bank account when they’re due. You can choose to pay:
- The minimum shown on your monthly statement.
- A fixed percentage of your balance, from 2.5% to 99%.
- A fixed amount of your choice.
- Your full statement balance.
We’ll always collect at least the minimum payment, even if the amount you set is lower. That way, you’re less likely to be charged additional fees.
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Avalanche and snowball are two common strategies for reducing credit card debt.
Debt snowball – this method focuses on paying off your smallest debts first. Once you’ve paid the minimum payment on your credit cards, you could put the money leftover towards the lowest card balance. Once that’s paid off, you could then move on to the next card. Some people find this method more motivating, giving you a series of small wins. But it might take you longer to clear your total credit card debt.
Debt avalanche – this involves paying off the largest debts first, before moving on to smaller debts. While the avalanche method might make money tight for the first few months, it could work out faster and save you more in the long run.
Let’s take a closer look
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According to The Money Charity, in May 2024 the average amount of credit card debt per UK household was £2,487. The actual amount will vary between households and individuals.
Before using credit, it’s important to consider what’s comfortable or affordable for you, rather than what might be ‘normal’ for other people.
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If you follow the terms of your credit card account, you shouldn’t be negatively affected by having and using a credit card. You could even improve your credit score by using and managing credit cautiously.
However, if you only make minimum payments for a sustained period, you could fall into persistent debt. That’s where you’re paying more in interest and fees than towards repaying your balance. In that situation your lender will get in touch to help you.
If you’re unable to take control of your debts, or worse still you start to miss payments, it could start to negatively impact your credit score. That could affect your ability to get further credit in the future.
If you’re experiencing money worries at any time, it’s important to take action. We’re here to help.
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To meet the terms of your credit card account, you need to make at least the minimum payment each month. The amount and due date are detailed on each statement you receive.
However, to minimise your borrowing costs and limit your chances of falling into persistent debt, it’s in your interest to repay as much as you can each month.
Keep in mind, the greater your balance, the more interest you’ll be charged.
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