How-to Guides » OLD GUIDE Pay off credit card debts

Get organised

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1) Prioritise your debts

Generally speaking, it's better to prioritise paying off your debts over saving. This is because the interest you accrue on your savings will almost invariably not cover the interest you are paying on your debt.

Even if you’ve got a 0% card deal, this won’t last forever; so you need to throw all your spare funds at it before the 0% period ends.

2) Budget

If you make savings elsewhere, you’ll have more money to help pay off your credit card debt. So sit down and work out exactly what your monthly outgoings and earnings are. A great way to do this is by using a statement of affairs calculator or this budgeting calculator from the FSA.

Then work out where you can make cut backs – could you socialise less often or lower your food bills? Any savings you make, start putting towards your debts.

Read How to budget in five simple steps for more tips.

3) Set up a monthly standing order

It's always a good idea to set up a monthly standing order for your minimum monthly repayment to ensure you remember to make a payment each month.

One slip and you could be charged a fee, lose your 0% deal, and possible get a black mark on your credit record.

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4) Snowball your debt

If you can’t get all your credit card debts onto interest-free deals, ‘snowball’ them to get them cleared as quickly as possible.

To do this, you need to work out which of your debts is charging the most interest because that's the debt that will be growing at the fastest rate.

Keep paying the minimum monthly payments on all of your borrowings, but put any leftover cash towards your most expensive debt. Once you've paid off this debt, put the extra cash towards the next most expensive debt, and so on. Any interest-free debt you have can be paid off last.

This method of snowballing will help you to clear your debt far quicker.

5) Up your income

You’ll be able to clear card debt much more quickly if you can up your income and throw all your extra earnings at your balance. Read Ten easy ways to make money to get you started.

Finally, if you are struggling to get rid of your debt, and need a few hints and tips on how to get into the habit or what to cut back to give you that extra bit of cash each month, why not ask a question using our Q&A tool? You may find that other members of lovemoney.com have experiences they can share which will help you.

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