Ditch your credit card debt

August 14, 2015

Using your credit card to pay for things can be handy, but it can also be easy to run up a big bill. They can be an expensive form of credit if you aren’t meeting your monthly repayments. If you are looking to tackle your credit card debt, we have a four step plan to help you.

Step 1 – Set a goal and stick to it

When you know how long it will take you to clear your debt and how much you will need to pay each month, it will help to keep you focused on your goal.

  • Know how much you owe and don’t ignore the problem.
  • If you want to clear your credit card debt, you will need to stop adding to it so cut back on the amount you use your card or you may want to take a break from using it altogether.
  • Try to make more than the minimum payment each month so that you can start making a difference to the balance.
  • Increasing your repayments each month, even by a little, will reduce the time it takes you to free yourself of credit card debt. Our credit card calculator will show you how long it will take you to clear your balance with your current repayments.  You can then compare that to how long it will take if you make higher repayments.
  • For example, if your credit card balance is €2,000 and you pay off €100 each month at an interest rate of 17%, even if you stop using your card completely it would take you 2 years to clear the balance. If you increase your repayments to €150 a month you could clear your balance in 1 year 3 months – 9 months earlier.

Step 2 – Find out if you are getting the best deal on your credit card

Make sure you are aware of the amount of interest you are paying on your card and find out if there is a lower interest rate you could be paying.

  • Ask your credit card provider if they will consider reducing the interest rate on your card. This will reduce the amount of interest added to your credit card debt each month.
  • Think about switching credit card and transferring the balance. If you can move your balance to a credit card with 0% interest for a period of time, then every cent you pay will reduce your debt. Our credit card Money Tool allows you to see what other cards are on offer and what fees apply to them.

Step 3- Look at what other options you have

  • Try using other payment options when buying items. If you continually overspend with your credit card, in the longer term it may be a better option for you to get a debit card as this way you won’t be able spend more than you have. Or, you could consider getting a prepaid card that can be used for purchases wherever a credit card is accepted.
  • Another option is to take out a personal loan to pay off your credit card bill. The Annual Percentage Rates (APRs) on personal loans are generally lower than on credit cards, so you will be charged less in interest. If you do this, make sure you don’t keep spending on your credit card or else you will be faced with both loan repayments and credit card repayments.
  • Check out our loan calculator to compare the costs of loans (which has all the different interest rates and terms included) and to work out what your repayments would be. 

Step 4 – Make a plan for the future

  • Choose a credit card that you can access online. This will help you keep track of your credit card balance and how much you are spending.
  • Consider reducing the credit limit to an amount you can comfortably afford to repay every month so you are not able to run up debt you cannot repay.
  • Don’t use your card for cash withdrawals except in emergencies, as you will be charged a high rate of interest (usually higher than the interest rate for purchases) often from the day you take out the money.
  • Try not to miss any payments, or put them off, otherwise you will be charged late payment fees. Late payment fees vary depending on your credit card provider. Late payments can also appear on your credit history.
  • Set up a monthly standing order or direct debit for the minimum monthly repayment, or more if you can afford it, to avoid late payments.
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