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

Watch out for sneaky tricks

5 tips on this task  |  Tweet

1) Avoid negative payment hierarchy

Negative payment hierarchy is a sneaky trick that's been adopted by the majority of credit card providers, and if you're not aware of it, you can easily get caught out.
In a nutshell, negative payment hierarchy allocates any payments you make on your credit card towards the cheapest debt first - while the most expensive debts get paid off last.

To avoid this trick, make sure you don't make any new purchases on a card you have transferred a balance to – in fact, your best bet is to cut up your 0% balance transfer credit card as soon as you receive it to avoid temptation. If you want to spend, get a 0% new purchases credit card instead. To find out more, read Beware of this dirty credit card trick.

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2) Avoid minimum monthly repayments

Minimum monthly repayments are usually set at ridiculously low levels – often as low as 2%. If you only make the minimum monthly repayment, your debt could take decades to pay off and could cost you thousands of pounds of extra interest.

So if you can afford to make more than the minimum monthly repayment each month, do so - this way you will pay off your debt far quicker and you won't have to pay as much in interest.

Find out more in The dangers of minimum payments.

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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