How To Pay Off Credit Card Debt

Credit card debt can feel overwhelming, but there are many steps you can take to work towards paying it off. In this blog post, we’ll review some simple strategies to help you get out of credit card debt for good.

Many people struggle with credit card debt, and it’s easy to see why. Credit cards make it convenient to spend money, but the high-interest rates can make the debt hard to pay off. If you’ve found yourself in this situation, don’t worry – you’re not alone. You can get your credit card balances down to zero with the right plan.

We’ll cover topics like budgeting, negotiating with credit card companies, and finding ways to pay more than the minimum amount each month. By the end, you’ll have a clear action plan to start paying off your credit card debt step-by-step. Let’s get started!

Create A Budget: The 50-30-20 Rule

The 50-30-20 rule is a straightforward and effective budgeting method that can help you work towards paying off your credit card debt. This method is simple to follow and breaks down your expenses into three key sections which are: needs, wants and savings.

The largest chunk of your budget, 50% should be allocated to your needs. This includes your mortgage or your rent, groceries, utilities, insurance, minimum borrowing repayments, commuting, or any childcare costs. All of these payments are vitally important to keep your life on track, so they should be prioritised ahead of wants.

Your wants are non-essentials that you would probably prefer to spend your money on but could manage without. The wants section includes day trips out, non-essential groceries, subscriptions, restaurants, gigs or festivals and even holidays. All of these expenses shouldn’t be prioritised, but should still be considered so that you can do the things in life that you enjoy the most.

The final section of this budget should be savings, whether that be locking money away for a rainy day in a savings account, using an ISA to save money, or in this case, use towards paying off your credit card debt.

To track your expenses and ensure you’re staying within your budget, consider using a budgeting app. These tools can automatically categorise your transactions and help you monitor your spending. Some popular budgeting apps include Plum, Chase and Monzo.

Pay More Than The Minimum Repayment Amount

Paying only the minimum amount each month on a loan or credit card can give the illusion that the debt is manageable. However, even with a 0% introductory rate, making just the minimum payment will have a minimal impact on paying the overall balance.

Paying only the minimum amount due on your credit card each month will result in your debt taking longer to fully repay and you paying more interest overall. Besides, it’s better to always try to pay more than the minimum payment whenever possible. 

For example, if you had an outstanding balance of £2,000 with an 18% annual percentage rate (APR), and you only paid the minimum each month, it would take you 34 years to fully repay the debt. Over that time, you would end up paying £3,983 in interest alone. So, it works in your favour to increase the monthly payment if you can afford to do so.

How To Negotiate With Credit Card Companies To Pay Off Debt

If you’re struggling to make your credit card payments, negotiating with your credit card company can be an effective way to reduce your debt. The key is to approach the process strategically and understand the different options available.

First, take the time to thoroughly review your credit card statements and understand exactly how much you owe across all your cards. Make a list of the balances, interest rates, and minimum monthly payments for each account. This will give you a clear picture of your overall debt situation and help you prioritise which accounts to focus on. 

A common option is to negotiate a final settlement. You can get a lump sum of money from selling an asset, such as a property or a vehicle, receiving an inheritance, a loan, or it could be a gift from family or friends. This involves offering the credit card company a one-time payment that is less than the full balance owed. While this can significantly reduce the total amount you have to pay, it’s important to understand that it will likely be reported to the credit bureaus as a “settled for less than full balance” account, which can harm your credit score. 

When you’re ready to negotiate, contact your credit card company directly. Explain your situation and the specific terms you’re seeking, such as a lower interest rate or a reduced lump-sum payment. Remember, credit card companies are often willing to negotiate because getting some of their money back is better than getting no money at all.

If the credit card company agrees to your proposed terms, be sure to get the agreement in writing before making any payments. This will ensure that both parties are clear on the details of the arrangement and protect you from any misunderstandings down the line.

How a Short Term Loan Can Help

A short-term loan can be an effective way to manage and pay off credit card debt. The key advantage is the fixed repayment schedule, which can help you become debt-free more quickly compared to just making minimum payments on your credit cards. 

With a short-term loan, you’ll have a set monthly payment amount and a defined end date for when the debt will be fully repaid. This structure can make it easier to budget and stay on track with your payments, rather than the open-ended nature of credit card debt. 

We hope this blog has provided you with helpful, actionable strategies to start paying off your credit card debt for good. By implementing these steps, you can take control of your finances and work towards becoming debt-free. Remember, getting out of credit card debt takes time and discipline, but it’s an achievable goal with the right plan in place. If you’re struggling with credit card debt and think a short-term loan could help, visit One Stop Money Shop to explore your options and get started.