It’s Talk Money Week from 08 to 12 November 2021 and a question that always comes on top of people’s minds is how to stay on top of your credit cards. Many people suffer in silence and don’t know where to go or who to turn to for advice on how to manage their credit card debts. Therefore, I have put some tips together on how you can manage your credit cards and where to find advice if you are struggling to stay on top of your finances.

Credit cards are often the easiest way to borrow money, but with many charging high rates of interest, costs can add up quickly if you aren’t careful.

The Money Charity, which aims to help people achieve financial wellbeing by managing their money better, estimates that the average UK household currently has £1,945 of credit card debt, so you’re not alone if you’re finding it hard to pay back what you owe.

Top tips for managing your credit card debts:

Know where to start when paying off your credit cards:

Start by listing out the credit cards you have, how much you owe on it, the interest rate you’re paying and any interest rate date changes, such as a 0% balance transfer period ending.

The credit card for which you’re being charged the highest rate should be paid off first even if the balance is smaller than the other ones. It may seem counterintuitive at the time however think about the long-term as the debt on such cards could spiral out of control.

To give you an example, when looking at the table above, you might think the best card to start paying off is Card 1, which has the largest amount owed on it. However, as you’re currently paying a 0% introductory rate, the amount you owe is not going to change if you don’t pay it off.

On Cards 2 and 3 however, interest is being charged and the amount you owe will gradually be creeping up. If no money is paid off, Card 2 will cost you £154 in interest alone this year, and Card 3 will cost you £259, so although it has the smallest amount owed, Card 3 should be your priority as it could have the biggest negative impact on your finances. Remember too, that if you don’t make at least the minimum repayment each month, you’ll also face other fees and charges on top of the interest you owe.

To stay on top of your credit cards:

1. Try to pay more than the minimum payments
Minimum payments are usually either a percentage of your account balance or a cash amount, so you might be required to pay 2% of your balance or £25, whichever is higher.
While many people can only afford to pay the minimum each month, doing so could extend your repayment by decades, leaving you paying far more in interest than you actually spent in the first place.

2. Set a budget and stick to it
This can help you stay in control of your money, helping you free up cash to pay off your credit cards.

3. Pay by Direct Debit
If you have been working hard to pay off your credit card, the last thing you want is to forget a payment and get stung by late payment fees.
By setting up a direct debit you can make sure you never miss a payment. You can set it up to pay as much as you can afford each month.

4. Consider transferring your balance
The best way to stay in control of your credit cards is to reduce the amount you owe. It could be worth getting a balance transfer card that offers a lengthy 0% introductory rate, or a low-cost personal loan to consolidate your debts.

If you have a lower credit rating, it may be harder for you to get a balance transfer card. If this is the case and you have more than one credit card, it may be possible for you to transfer your balance to your card with the lowest interest rate. You will probably have to pay a one-off transfer fee, but you should hopefully save money in the long term.

Where to find more advice

If your situation is becoming overwhelming and you are struggling to stay on top of your credit cards, get in touch with your card providers as soon as possible and let them know you’re experiencing difficulties. They may be able to negotiate an affordable repayment plan with you, but if they’re unable to help, seek professional advice as soon as possible.

There are plenty of free sources of advice available and many charities and organisations can help you negotiate with your creditors on your behalf. These include:

Citizens Advice – 0800 144 8848 (England) 0800 702 2020 (Wales)
StepChange – 0800 138 1111
National Debtline – 0808 808 4000
The Money Charity – 020 7062 8933
PayPlan – 08002802816

Also, consider getting in touch with your local credit union such as Thamesbank Credit Union. They can give you some credit towards paying off your credit card debts while at the same time encouraging you to start saving.

Whatever happens, don’t suffer in silence, as dealing with debts on your own can take a real toll on your mental health.

Author: Mukesh Malhotra, Chair of Thamesbank Credit Union