6 steps to help tackle credit card debt

January 12, 2016

If you are carrying a large credit card balance into the New Year now is a good time to try and tackle it. We have set out a number of steps to help you beat debt:

Step 1 – Don’t ignore the problem

If you are having money problems, you may be tempted to ignore them and hope they go away. If you find that you are always running out of money, missing repayments or relying on credit for your day-to-day spending, the first and most important step is to decide to do something about it. This can be hard to do but the remaining steps will make it easier.

Step 2 – Work out how long it will take to clear your debt

Knowing how long it will take you to clear your debt and how much you will need to pay each month will help you work out a plan to tackle your debt. Our credit card calculator will show you the length of time it will take you to clear your debt if you pay the minimum repayment, and how long it will take if you increase your repayments. For instance, if your credit card balance is €2,000 and you pay off €100 each month at an interest rate of 18% and stop using your card 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 one year and three months (nine months earlier). Increasing your repayments each month will cost you less in interest and reduce the time it takes you to free yourself of credit card debt.

Step 3 – See if you can get a better rate on your credit card

Check to see if there is a better rate available to you. Ask your credit card provider if they will consider reducing the interest rate on your card, which will help lower your repayments. If you have no luck with your current provider you should consider 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 interest rates apply to them. There are currently six providers offering introductory offers to those who are considering switching.

Step 4- Should you consider taking out a personal loan?

Taking out a personal loan to pay off your credit card bill might be a worthwhile option as interest rates on personal loans are generally lower than on credit cards, so you will pay less in interest. If you do this, make sure you stop spending on your credit card or else you will be faced with both the 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 5- Changes you can make to keep track of your spending

Make it easier for yourself by setting up a direct debit for an amount you can afford and choose a credit card that you can access online. This will help you avoid late payment charges. Late payments can damage your credit history and, depending on your credit card provider, can also incur fees. Consider reducing your credit limit to an amount you can manage, preventing you from running into debt you cannot repay and avoid using your card for cash withdrawals as you will be charged a higher rate of interest.

Step 6 – Are you continually overspending with your credit card?
If you are regularly overspending with your credit card, it may be a better option for you to get a debit card. 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. If you are experiencing difficulty making your repayments and don’t know what to do, take a look at our debt action plan, or you can get help from the Money Advice and Budgeting Service (MABS).

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