Are you struggling to pay your credit card debt? Well, you’re not alone. As per the February 2024 statistics by Money Charity, the average credit card debt in the UK per household is around £2476. The good news is that there are effective strategies to help you get back on track and take control of your finances.
In this article, we’ll explore some practical tips and tricks that can make a big difference in managing your credit card debt. Whether you’re dealing with a small balance or a mountain of bills, these strategies can help you breathe easier and start moving towards financial stability. Let’s dive in!
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Check Whether You’re Responsible For The Debt
Before you start to pay off credit card debts, you must check whether you’re responsible for it.
Below are some points to note:
- You’re responsible for the credit card debt only if you’ve signed a credit agreement with the credit card company.
- You could have signed it alone or with a partner. In case you’ve signed a credit agreement with a partner both of you are liable for the debt. If your partner stops paying, the credit card company can make you pay the remaining debt.
- If you’re an additional cardholder and signed the credit agreement you are responsible for the credit card debt. If you’ve not signed, you are not liable to pay the debt.
If you receive any demand to pay debts from the credit card company, first review the credit agreement. Look for your signature and if there are any co-signers. If you’re unsure, call the credit card company and clarify your role and liability.
In case, there’s any confusion, contact a legal advisor and they’ll help you to clarify your responsibilities. If you are not responsible for the debt, explain it to the credit card company clearly and ask them to stop contacting you.
If they continue to pressure you, you can file a complaint against the company at the Financial Ombudsman Service (FOS) from their website.
Suppose you are responsible for the debt, what are the next steps you should take? Keep reading the article to find out.
Did The Credit Card Company Comply With All The Rules When You Applied For The Debt?
Sometimes, credit card companies don’t follow the rules during the application process. This can affect how much credit card debt is normal for you.
Below are some of the common rules violated by the credit card companies:
- Lack of Affordability Checks: Not verifying if you can afford repayments.
- Pressure Tactics: Coercing you into signing the agreement.
- Lack of Clarity: Not providing clear and understandable terms.
Ask yourself:
- Did they check if you could afford the repayments?
- Were you pressured into signing?
- Or perhaps you didn’t fully understand what you were signing?
If any of the above improper practices had happened the credit card company might have to cancel your debts.
If you suspect any wrongdoing, consult an adviser. They can guide you through the process of investigating and possibly having you forgiven.
If you’re struggling with your credit card debt and need more advice and guidance to become debt-free contact us.
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What To Do If You Receive A Letter About The Debt?
Receiving a letter about your debt can be alarming, but don’t panic.
First, read the letter thoroughly and understand what the credit card company demands from you.
If the letter mentions taking court actions contact a legal advisor and figure out a way to handle it smoothly. If you’ve already been to court and the letter mentions a bailiff might visit, you must find a way to stop them.
Sometimes the credit card company might offer you a repayment plan if you’ve been making payments for 36 months or more and threaten to take court action if you don’t pay. What should you do in this situation?
Usually, repayment plans aim to clear debts in four years.
If you have offered a repayment plan,
- Review the plan details and understand the terms and monthly payment amounts.
- Consider whether the payments are affordable. If not contact the creditor, explain your financial situation, and negotiate a feasible payment plan.
- You can also request them to freeze your interest as it can reduce your debt significantly.
Plan Out Your Budget
You must allocate some amount towards your debt each month if you want to become debt-free.
How do you create a budget for debt repayment?
- List all your sources of income and the amount.
- Record all the monthly expenses including the essentials and non-essentials.
- Subtract the expenses from income to find out the amount you can allocate for the debt.
If it’s less than the monthly minimum payment the creditor gave you, negotiate better terms with your creditor or try to lower your expenses. Set financial boundaries and stick to them.
Tip: Always pay at least the minimum monthly payment given by your credit card company to avoid extra charges and protect your credit score.
Managing More Than One Credit Card
What should you do if you have more than one credit card debt?
Source: MoneySavingExpert
Managing multiple credit card debts is challenging, but you’ll be able to handle it effectively with proper planning.
Here is a simple strategy: :
- Prepare your budget and calculate how much money is left for debt payments as mentioned in the previous section.
- List all the credit cards you own, debt amounts, and interest rates.
- Arrange the cards on the priority order of payment. The card with the highest interest rate must be at the top.
- If you have extra money, pay off the card with the highest interest rate. Try to pay the minimum amount on each card.
The above strategy will help you to reduce the money spent on interest and improve your credit score.
What should you do if you can’t afford the minimum monthly payment? Are there any other plans? Will you be able to get another loan? Keep reading for the answers.
Steps To Take If You Can Afford Only The Minimum Repayment
Suppose you can only make the minimum monthly repayments and you don’t see any financial improvements in the future, what should you do?
Keep paying the monthly minimum payment as it avoids late charges which could add up to your debt and lower your credit score further.
However, it may take a long time to pay off your debt with minimum payments and the credit card companies will keep charging you interest. So, you must try to find an alternative if possible. Below are some ideas:
- Discuss with the credit card company and lower your interest.
- Transfer your debt to a credit card with a lower interest rate.
- Obtain a debt consolidation loan where you can combine all your debts into one payment plan with a low interest rate.
If you want to do a credit transfer or obtain a debt consolidation loan, you must meet some eligibility criteria. It varies between companies, but generally, the banks look for your credit score, credit history, income, and overall financial situation.
It’s difficult to secure a new card or loan with a low credit score. If this is the case, don’t panic.
Keep paying as much as you can and talk to your credit card company about freezing interest and fees.
Additionally, check your credit report and correct any errors on it. Even a slight increase in credit score can make a positive impact.
Before doing a credit card transfer or obtaining a debt consolidation loan consider the upfront costs, repayment terms, and interest rates thoroughly. Opt for it only if you have benefits.
Protip: Use the new credit or loan to pay off your existing debt. Avoid expenditures on the new credit card.
What To Do If You Can’t Afford The Minimum Repayment
When you can’t afford even the minimum repayment, contact your credit card company immediately.
Show them your budget and explain your priority debts. Ask them to freeze interest and charges. This could save up much of your money.
If you think your financial situation will improve in a few months and then you can afford the payments, ask the credit card company to pause repayments or agree on a manageable repayment plan.
You can also inform the credit card company if you are struggling with the living costs. The Financial Conduct Authority (FCA) requires companies to assist customers in financial distress.
Contact a debt charity for free assistance. They’ll guide you to manage your debt effectively and inform you about any government financial aid available. Below are some debt charities in the UK:
- StepChange
- Citizens Advice
- National Debtline
Other Debt Solutions
If you are unable to pay off your debts with the above strategies, consider one of the following debt solutions.
- Individual Voluntary Arrangement (IVA): This is an agreement with your creditors to pay off all your debts. Here you pay regular monthly payments to an insolvency practitioner who’ll distribute it among your creditors.
- Debt Relief Order (DRO): DRO is a solution to deal with your personal debts, where your debts would be frozen for 12 months. After 12 months, it’s likely to be forgiven.
- Debt Management Plan (DMP): DMP is an agreement between you and the creditor to pay off the debts in fixed monthly instalments or to make repayments after a few months.
You must understand the terms and conditions of each debt solution and choose the best fit for your needs. If you’re struggling with your credit card debt, fill out this online form. One of our professional debt advisors will contact you.
Final Thoughts
If you are asked to pay credit card debt, first you must check whether you are responsible for it. Check your credit agreement for this. If you’re confused, contact the credit card company and clarify.
In case you have signed, a check if the credit card company violated any rules, If they have, you can request them to forgive your debt.
If you are responsible for the debt, take action to pay it off. Plan your budget and allocate at least the minimum payment for the debt. In case you have multiple credit cards, try to transfer into one card or a loan with lower interest.
If you can’t afford the minimum payment, negotiate an affordable payment plan with the creditor and request them to freeze your interest.
Key Points
- If you are asked to pay credit card debt, first determine if you’re liable for the credit card debt, especially if you’re an additional cardholder or co-signer.
- Investigate if the credit card company broke any rules during the application process, such as failing to check your ability to repay or using pressure tactics.
- Act promptly when you receive letters about your debt to avoid escalation, such as court action or visits from bailiffs.
- Understand and negotiate repayment plans offered by credit card companies, especially if the suggested payments are too high.
- Create a detailed budget to determine your available income for credit card repayments, aiming to pay at least the minimum amount to avoid extra charges.
- Prioritize paying off credit cards with the highest interest rates first, while ensuring minimum payments are made on all cards.
- Consider balance transfers or debt consolidation loans to reduce interest rates and make repayments more manageable.
- Correct errors on your credit report and continue making payments to improve your credit score if denied new credit cards or loans.
- Contact your credit card company if you can’t afford minimum repayments and request a freeze on interest and fees or negotiate a manageable repayment plan.
- Inform your credit card company if you’re struggling with the cost of living and seek help from financial advisers or government resources.
FAQs
If the total balance is more than 30% of the total credit limit, it’s considered high debt. It’s better to keep the credit utilisation between 1%-10%.
Make the monthly payments regularly without missing, avoid taking any new debts, and check your credit report for errors and correct them promptly to improve your credit score.
It’s generally advisable to pay off high-interest credit card debt first because the interest you save is often higher than what you would earn from savings. However, it’s also wise to maintain an emergency fund for unexpected expenses.
Yes, you can negotiate with your credit card company to reduce interest rates, waive fees, or agree on a repayment plan that suits your financial situation. Be proactive and communicate openly about your difficulties.
Ignoring credit card debt can lead to increased interest and fees, damage to your credit score, legal action, and potential visits from bailiffs. It’s crucial to address debt issues promptly to avoid these consequences.
Most debt will be removed from your credit report after 7 years, but the creditor can contact you regarding the debts. Some debts may stay in the report for 10 years or indefinitely.
