Dealing with credit card debt

What is credit card debt?

Whenever you spend on your credit card, you add to your balance. This balance is interest-free for a set period of time – usually around 20-30 days – but then after this, the balance needs to be settled. This is usually called ‘paying off’ your credit card.

It’s up to you if you pay off your balance in full each month when it’s due, or over time. You can choose to make a 'minimum payment', which is a proportion of your balance, or an amount set by your lender.

If you pay off the balance within your interest-free period, you won’t be charged interest. After that, interest may be added to the balance.

Credit card debt example

• You spend £100 on shopping on January 1st.
• Your credit card bill is due on February 1st. Your minimum payment might be £5, so if you made your minimum payment, you’d have £95 remaining.
• If your credit card interest rate was 20%, £19 of interest would be added to the balance you owe, leaving you with a balance of £114.
• This could then continue each month, even if you never spend any more money on the card.
• On your March credit card bill, if you’re still not able to pay off your credit card in full, and can only make the minimum payment of £5, your balance would then be £109. But interest would then be added, bringing your total to £130.80.

As you can see, it’s easy for credit card debt to snowball if you’re only able to make the minimum payments each month.

What happens if I can’t pay the minimum payment on my credit card?

If you’re not able to pay the minimum payments, then your account will go into arrears. If this happens, your lender will get in touch with you to ask you to make a payment. If you can’t, your account will default, and the lender might choose to look into legal action.

If you’re concerned about not being able to make your minimum payment, it’s best to get in touch with your credit card company to see how they can help. They may be able to freeze your interest, pause your card repayments, or look into a payment plan for your credit card debt.

What is persistent debt on a credit card?

Persistent debt is when you’re paying more in interest and other fees than what you’re actually paying back on your credit card balance for at least 18 months. Ultimately, this makes it harder to reduce the amount that you owe and will take longer to clear off.

In a lot of cases, the reason people end up struggling with persistent debt is because they’ve been consistently making minimum payments. Whilst minimum payments aren’t necessarily problematic, they could lead to an issue over time.

For more information, National Debtline have a persistent debt factsheet explaining what steps your lenders may take and ways that you can try take control of your situation.

How to pay off credit card debt

When it comes to paying off credit card debt, there are a few steps you can take. There’s no single ‘best way’ to pay off credit card debt, because everyone’s financial situation is different – but these tips will hopefully help to give you somewhere to start.

Work out your budget and how much you can afford to pay

To start clearing your credit card debt, you’ll need to work out how much you can afford to pay each month. Use tools like our free Budget Calculator to easily look at your income and outgoings, and work out how much you can afford to pay towards your credit card debt.

Look into the debt snowball method

The debt snowball method can help if you have multiple kinds of debt, including credit card debt. It focuses on clearing one debt at a time, from the least to the most expensive. Our complete guide to the debt snowball method can help explain more about this, so you can see if it’s right for you.

Stop using your credit card if you can

It can be hard to stop using your credit card, especially if you’re in a difficult financial situation. But using your credit card when you’re already in debt can just add to the problem, especially as interest adds up. If it’s at all possible, stop using your credit card until you’ve managed to clear some of your existing debt.

Get free debt help and support

If you’re worried about credit card debt, you can always get free, independent debt help and support from charities like StepChange, National Debtline, and MoneyHelper.

If your debt is being managed by Lowell, get in touch

If your credit card debt is being managed by Lowell, please get in touch. Our team is supportive, friendly, and experienced when it comes to finance and debt. We work with people just like you every day, and we won’t ever judge you for your circumstances or make you pay more than you can afford.

If you’re in a difficult situation, we might be able to help – so speak to our friendly team and start working with Lowell so you can take control of your finances.