How To Pay Off Credit Card Debt In 2024

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The Generation Money Guarantee

Generation Money logo

At Generation Money our purpose is to help you make better financial decisions. All of our articles are independently written and/or edited by finance professionals and adhere to strict editorial guidelines. This post may contain links which, if clicked, could result in a payment to the site. These links never impact our editorial policy and all rankings and product recommendations remain unbiased. For more details, read how this site is financed.

In this guide we cover how to pay off credit card debt in the UK to help you clear your debt faster.

Credit card debt in the UK surged in 2023 and stood at £68.9bn at the end of November 2023. That’s £1,281 for every adult in the UK, on average. Our credit card statistics show that credit card debt has risen by a whopping 8.4% annually in 2023 which is the fastest annual increase since 2010.

For many people, having some credit card debt – whilst not ideal – is not a problem and can be comfortably managed. However, with average representative credit card interest rates at record highs, credit card debt can quickly spiral.

So if you want to take control and pay off your credit card debt sooner rather than later then read on for our best payoff strategies.

First, always make the minimum payment

Before getting into our credit card payoff solutions, it’s important that you make the minimum repayment on each of your credit cards every month. You’ll avoid having late payment charges added and potentially hurting your credit score.

To make this easy you should set up a direct debit for the minimum repayment each month for all of your credit cards. Your credit card provider will give you this option when you sign up and you can usually set this up if you haven’t already done so via online or mobile banking. 

Ensuring that you make the minimum payment each month will help to protect your credit record which, in turn, can aid you in paying off your debt faster using our strategies below.

5 strategies to pay off your credit card debt

Click the links below to read about each strategy, or read on to go through each in turn.

Transfer expensive debt to a 0% card

One of the quickest ways to cut your interest bill and monthly payments is to transfer existing credit card debt to a 0% balance transfer card.

By doing so you’ll then have no added interest to pay on the amount transferred for a set period which allows you to pay off the debt faster. All of your payments will go to clearing the debt without interest building up.

You’ll need to undergo a hard credit check to get approved for a 0% balance transfer but most card companies will give you an indication of whether or not you’ll get accepted before a full application.

Some credit card companies will charge a one-off balance transfer fee which is usually 1%-3.5% of the balance, subject to a minimum of £5. Not all charge a fee, though, so always aim for a no-fee balance transfer card.

Other factors to consider:

  • Transfer as much as possible of the highest interest rate debt, but aim to not exceed 95% of your new balance transfer card’s credit limit.
  • Make a note of when the interest-free period expires and if you have debt left at the end of it, try transferring the remaining balance to a new 0% interest card.

Ask your credit card company to lower your interest rate or freeze interest

There is no obligation for your credit card company to do this but under new FCA Consumer Duty rules, all FCA registered firms must put their customers’ needs first. If they say no then you’ve not lost anything and can move on with the next credit card debt payoff solution.

But there are many success stories out there of lenders either agreeing to freeze the interest on your card or significantly reducing the interest rate. Just be aware that the lender is likely to cancel your card to stop you from spending any more on it.

Pay off the most expensive debt first

You should always aim to pay off the most expensive debt first. To do this, make a list of all of your debts – including non-credit card debt – and note the interest rate of each of them. 

Rank them from highest interest rate to the lowest and concentrate on paying off the debt with the highest rate first. If you have an overdraft it’s likely that this is more expensive than your credit card debt as overdraft interest rates typically hover around 40% at the moment.

Focus all of your payments on the most expensive debt first whilst only making the minimum repayments on all others, then once it’s cleared move on to the next most expensive.

Paying off the most expensive debt first allows you to save the most in interest payments. Although this is a very simple and logical way to order your debt repayments, this method of paying off the most expensive debt first is sometimes referred to as the ‘avalanche method’.

We’re not sure why such a simple process needs a special name – maybe it makes paying off debt sound a bit sexier – but either way this method of paying off credit card debt will save you the most money in the long run.

Use savings to make overpayments

If you’re in credit card debt then you may not have much in the way of savings, but if you do then you should consider using them to make overpayments and clear your debts faster.

Our credit card statistics show that the average representative interest rate on credit cards as of October 2023 is at a record high of 23.8%. The interest rate paid on savings accounts, whilst much higher now than in the recent past, will be significantly lower than this so it makes sense to use your savings to cut your expensive debts.

Starting with the most expensive debt first, as we outlined above, use your savings to make extra payments to clear your debt faster.

Other factors to consider:

  • You may not want to use all of your savings to pay off your debt – it’s often a good idea to keep some cash savings as an emergency fund. But use as much as you feel comfortable with to clear your debt faster.
  • The maximum interest saving will come from paying a lump sum off in one go upfront, but if you don’t want to do this then you can use your savings to make overpayments each month and you’ll still clear the debt faster.

Consider taking out a personal loan to clear expensive credit card debt

This credit card payoff method should be considered only once you’ve tried all of the above first. 

Typically, personal loan interest rates are lower than that of credit cards. This means it can often make sense to take out a personal loan and use it to clear the balance on a credit card. You then repay the loan in fixed instalments each month.

In this way it can help you to avoid spending anymore on a credit card if you pay it off using a loan and then immediately close the card account.

You should carefully consider your position before taking out a personal loan to pay off credit card debt. As you’ll see below in our worked example, if you follow the first 4 steps above then you may not need to look at getting a personal loan. 

It can also sound counterintuitive to take out a loan when you’re trying to pay off debt. But it can make sense if you can get a lower interest rate on a personal loan than the interest rate on your credit card debt.

How to pay off credit card debt efficiently by combining strategies

You can use the above strategies together – and most people should. 

For example you can balance transfer as much debt as possible to a 0% interest card. You can then ask your lenders to freeze interest on any remaining debt. 

After that you can then rank your remaining debts in order of most expensive first and pay them off in that order. At the same time, you can use your savings to make extra payments on your debt, again focusing on the most expensive debt first.

Once all of those methods are done, you could then look at taking out a personal loan to pay off any final debt that has not had the interest frozen or reduced to a level that’s below the personal loan rate you can get.

Worked Example On How To Pay Off Credit Card Debt

Now we’ll run through an example of how you can use the above credit card payoff strategies in combination. 

Let’s say you have the following debts and savings:

  • Credit Card 1: £5,000 balance with an interest rate of 20%
  • Credit Card 2: £2,500 balance with an interest rate of 22%
  • Overdraft: £1,000 with an interest rate of 40%
  • Savings: £2,000 earning 5% interest
  • Total monthly minimum repayment1: £205.48
  • Total monthly interest1: £154.19

Note: there is no minimum monthly repayment on overdrafts. Interest will be charged daily and added to your account once per month.

Here’s what you could do to pay off your credit card debt in the most efficient way.

In this example, the overdraft is the most expensive debt. You cannot make a balance transfer from an overdraft to a 0% interest credit card, so instead you should focus on using any savings to pay this off as the priority. From your savings you take £1,000 and use this to pay off the overdraft.

You then take out a 0% balance transfer credit card with a credit limit of £3,000. You should transfer the entire balance of £2,500 from Credit Card 2 to the new card. This is because the interest rate is 2% higher than that of Credit Card 1. 

Then, transfer £350 of the balance from Credit Card 2 to the new balance transfer card. This means you have a total balance of £2,850 on your new 0% card, which is 95% of your credit limit.

Next, you call your Credit Card 1 lender and ask them to freeze or reduce the interest. They agree to reduce the interest rate to 15%. 

You are left with:

  • Credit Card 1: £4,650 balance with an interest rate of 15%
  • Credit Card 2: £0, debt cleared
  • Balance Transfer Card: £2,850 balance with an interest rate of 0%
  • Overdraft: £0, debt cleared
  • Savings of £1,000 earning 5% interest
  • Total monthly minimum repayment: £133.71
  • Total monthly interest: £53.96

Already your monthly interest bill has more than halved and your minimum repayments are over £50 lower.

You decide that you want to keep £1,000 in savings as an emergency fund. 

Then, you look at personal loan rates and your eligibility criteria. It’s possible for you to get a personal loan of up to £5,000 at 10% interest over 4 years. You apply for a loan of £4,650 and immediately use the cash to clear the entire balance of Credit Card 1.

Finally, your situation looks like this:

  • Credit Card 1: £0, debt cleared
  • Credit Card 2: £0, debt cleared
  • Balance Transfer Card: £2,850 balance with an interest rate of 0%
  • Overdraft: £0, debt cleared
  • Personal loan (over 4 years): £4,650 with an interest rate of 10%
  • Savings of £1,000 earning 5% interest
  • Total monthly minimum repayment: £145.50
  • Total monthly interest: £16.87

This saves a huge 89%, or £137.32, in interest in the first month alone. It also quickly reduces monthly payments by £60 compared to the initial situation. Note that the minimum repayment goes up once a personal loan is taken out, despite interest going down. This is because personal loans have fixed repayment periods, unlike credit cards.

It’s possible to do all of the above in just a few days if you have a decent credit record. However, the final stage of taking out a personal loan may not be achievable for everyone as some lenders may view two credit applications in a short period of time as risky behaviour (balance transfer card application followed by a personal loan application).

Get help for free if you’re struggling

If you feel overwhelmed or are struggling to repay all of your debts then don’t panic – there’s free help available to you by trained debt counsellors.

You can get credit card debt help from the below two non-profit organisations will give you one-to-one debt counselling without judgement. 

Stepchange Debt Charity
Access StepChange’s full debt help service, including Money Coaching tool, from anywhere in the UK. They’re able to help you with any type of debt you have and will also negotiate with your creditors on your behalf.

Citizens Advice
Similarly, Citizens Advice offers a full debt help service as well as consumer advice. They have regional offices throughout the UK, but you can call them or speak to an advisor online.

Money worries can often damage your emotional and mental health. For mental health support, visit Mind who provide advice and support to empower anyone experiencing a mental health problem.

How To Pay Off Credit Card Debt – Final Words

With credit card debt rising at the fastest rate in 13 years, it’s important that you take control of your finances. 

The 5 strategies we’ve covered above show you how to pay off credit card debt in the UK as soon as possible. If you follow these, you’ll be able to clear your debt faster and have more cash to save or invest towards your future.

Note:
1. We have used our own models to estimate the monthly minimum repayments and interest due in this worked example. Having extensive experience of working in the banking industry, we have detailed in-house financial models that accurately replicate bank lending calculations. Interest calculations include netting off interest earned on savings.

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