9 min read

6 great ways to reduce your credit card bill

Hannah Salih
6 February 2017

Built up debts across a few different credit cards? We’ve put together a list of 6 ways to make unmanageable debt feel more manageable again.

Borrowing money on credit cards can cost a lot on just one card - let alone if you're juggling several balances. The extra interest every month soon adds up. Multiply that by several cards, and the total keeps getting bigger. If your payments only just cover the interest, it’s very difficult to make a dent.

Here are 6 ways to help get your credit card debt back on track.

1. Work out how much you owe and consider paying the most expensive debt first

A great starting point is to make a list of everything you owe. Think about credit cards, store cards and also any overdrafts, because overdrafts on your current account are often more expensive than credit card debt.

For each one, write down the current balance, the interest rate - known as the Annual Percentage Rate (APR) - and your credit limit. If you’re on any introductory offers, check when they finish and what the new interest rate will be afterwards. Think about repaying the most expensive debts first to avoid your debt building up further.

What to do if you have savings AND credit card debt
If you have savings you may want to check the interest rate you're earning compared to the interest you're paying on your current debt. If you're earning less interest on your savings than you're paying on your debts, you may want to consider moving over your savings to pay off your cards. The quicker you clear your debts, the less interest you will pay, and the quicker you can start saving again.

2. Make your minimum payments

Credit cards can be an expensive way to borrow if you don't pay off your full balance each month. And they can become even more expensive if you fail to make the minimum monthly payment shown on your statement.

If you miss a payment, you could also lose any special offer you have (for example if you're on a 0% interest card) and you can end up paying higher interest rates straight away.

One other thing to consider is failing to make the minimum payment each month is likely to show as a 'late' or 'missed' payment on your credit report, which can harm your credit score.

So if you can, try to prioritise making the minimum payment in on time. You can always set up a direct debit so that you don't have to worry about remembering dates.

3. Think about switching to a lower rate card

Now you know how much you owe, think about transferring the total balance to a balance transfer card. Usually these types of cards come with a 0% interest free period for a certain length of time.

If you can’t get a credit limit to cover all of your debt on a balance transfer card, think about moving over the debt that is costing you the most.

By moving money to lower interest rates, you could clear your balances quicker, because more of your monthly payments go towards paying off your debt. However, if you do transfer a balance to a new card, try to avoid spending on your old card. You could end up with bigger debts than you began with.

Compare balance transfer credit cards on ClearScore

4. Think about trying for a cheaper rate on your current cards

If you can’t or don’t want to apply for a new credit card, you might still be able to cut costs using cards you already have. Unfortunately, interest-free deals are often only available to brand new customers. But there’s loads of competition between card providers, so it could be well worth giving your card company a quick call.

Consider asking if they can offer you a better deal on the cards you already have. Explain you’re thinking of moving debt from more expensive cards elsewhere. If you’d like the space to switch balances from other cards, see if you can get a higher credit limit.

If you can get a cheaper deal on a card you already have, you can move money around without applying for yet another new credit card.

5. Understand what makes a good credit card deal

When weighing up different deals, things to check include:

  • What is the interest rate?
  • What is the fee for transferring a balance?
  • What is the credit limit?
  • How long does the lower rate or 0% interest rate last?
  • What is the interest rate after the deal ends?

Lower rates are better, and zero is usually best. If you look for longer deals, you will have more chance to pay off your balance before higher rates kick in.

However, watch out for the small print, particularly on balance transfer cards. Even an interest free credit card may still charge a fee (known as a handling or transfer fee) to transfer your balance.

But if the fee is less than you're paying in extra interest on a more expensive card, it could still be worth doing. However, if it could take a long time to pay off your debt, be wary of lots of short balance transfer deals which could see the amount you pay on fees really add up.

Two tips before you apply for a new credit card

  • Check your credit report and make any possible improvements to your credit score to boost your chances of getting the best possible interest rate. (Read our top 10 tips).
  • Use soft-searches to check your eligibility on credit cards before you apply. Applying for a credit card and getting rejected can be harmful to your credit score. You can get an idea of which cards you are more likely to be accepted for, without affecting your credit score, on your ClearScore 'Offers'.

6. Try snowballing

If you’d like to clear your credit card balances quickly, one approach you can take is called “snowballing”. This means paying the minimum on all debts apart from one, and then paying as much as possible off that one every month.

Some people target the debt with the highest rate, whether it’s a credit card or overdraft. This will help save the most in interest payments. Others focus payments on the smallest balance, for the satisfaction of shifting one debt as quickly as possible.

Clearing your debt may start slowly, but it will get faster. As each overpayment chips away at more of the balance, next month less interest will be added, and your payment will make a bigger dent. Once you have cleared the first debt, you can take the money you no longer have to pay on the first debt, and add it to the payments on your next debt.

Just as a snowball gets larger and larger as it rolls downhill, you’ll be able to pay off your debts faster and faster each month, as you free up money to make larger payments. You could think about snowballing once you have arranged a cheaper deal, whether on a new or old card.

In a nutshell:
  • Moving debt to a lower rate, or interest free, card will cut your interest payments, so you can pay off your balance quicker.
  • Compare balance transfer fees to how long the special offer lasts, to see how much interest you could save.
  • Setting up direct debits for at least the minimum each month means you never miss a payment.
  • By focusing on overpaying one debt, you could pay it off quicker, and then add those payments to the next balance on the list.
  • Making a note of when any special offers end can save money. Setting a reminder a couple of months before gives you the chance to either clear the balance, or transfer the money elsewhere, before the rate jumps up.
  • If you transfer a balance to a new card, try to avoid spending on the old card. You could end up with bigger debts than you began with.
  • If your debt is becoming unmanageable, think about contacting a debt charity such as Step Change for free debt advice.
by Hannah Salih

Hannah reads all the finance info on the web so you don't have to. She knows all there is to know about your finances but still spends all her money on brunch. 

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