Credit card spending up at the end of 2023

£20.9 billion was spent on credit cards last November – up 6.2% on the year before – according to figures out from UK Finance.

People completed 379.3 million transactions on credit cards in the penultimate month of the year – also up (6.45%) on the year before.

Outstanding balances on credit cards also grew in the twelve months to November by 9.8% with 49.5% of all outstanding balances incurring interest – down from 50.9% in 2022.  

Spending on debt cards also increased last year, up 2.6% on 2022 but the total amount spent actually reduced by 1.3% to £66.3 billion.  

How to pay off credit card debt

Credit cards can be a convenient way to borrow money because you can repay the amount you borrow in smaller amounts over a long period of time.

They also provide a greater level of security because if anything goes wrong with the purchase you should be able to get your money back through the ‘chargeback scheme’.

If you use a credit card, you should plan to repay what you owe in full each month to avoid interest charges. The rate you pay will depend on the annual percentage rate (APR) of the credit card you have – each one is different.

However, if you’re only making minimum payments or using them to pay for everyday living costs, you could quickly find your debt spiralling.

Signs you may have difficulties with credit card debt include:

• Difficulty paying bills on time
• Paying just the minimum amount each month
• Having debt spread across several different credit cards
• Your minimum credit card payments exceed 10% of your net income
• Having to rely on credit cards to cover every day essentials as you don’t have enough money in your bank to cover them
• Receiving debt collecting calls

If you recognise any of these traits, then you should take steps to reduce your credit card debt. Here are some ways to reduce what you owe and get your finances back to a healthier state.

Check how much you owe

When you’re worried about money or know you’re in debt, it’s easy to bury your head in the sand. Lots of people stop opening post and emails or ignore debt collecting calls but the problem won’t get better until you address it.

Add up everything you owe on credit cards – quite often people have no idea how much they owe as their debts are spread across several cards.

Once you’ve done this, it’ll be easier to start dealing with the debt. Look at your total outgoings against your income and identify how much extra you can afford to pay each month to start to clear down the outstanding balances. Sometimes using a budgeting tool can make this easier – you can use ours for free here.

Start with the most expensive debts

Different credit card providers charge different APR rates. When listing your credit card debts start with the ones that charge the most interest and work your way down. This way you can clearly see what is costing you the most and you can focus on paying these ones off first.

Although your priority should be to pay off the more costly debts first, you must still keep paying the minimum repayment on the other cards. Missing a card payment could result in you incurring further charges and affect your credit score.

Set up a fixed monthly sum

The set minimum amount is the smallest amount you should be repaying every month. It’s typically between one and five percent of what you owe.

You should never aim to just repay the minimum amount each month. If you regularly do this, interest can really start to build up and what you owe will quickly grow. Remember, the longer it takes you to pay it off, the more you will ultimately repay.

To avoid relying on minimum payments, set up a higher fixed payment to be taken from your bank account each month. This will help to pay down the debt more quickly. And it will also mean you won’t forget or miss a payment, which could affect your credit score.

Consider consolidating the debts

Consolidating your debts means combining all your credit card debt into one balance. This makes it easier to keep on top of as you will have just one monthly payment and due date. You can either move all your outstanding credit card debt onto one new credit card – preferably one offering 0% balance transfers - or you could take out a consolidation loan.

A consolidation loan combines all your debts into one payment. With this type of loan, you borrow enough money to pay off all your debts. You then owe money to just one lender, with one interest rate. And, because you can take the loan over a longer period, the monthly rate you pay tends to be less than the combined amount you were previously paying to several different credit card providers.

There are two types of debt consolidation loans – secured and unsecured. Loans that are secured are secured against a possession such as your home or car. If you miss payments, you could lose that possession. While the opposite is true for unsecured.

You can use comparison sites such as Compare the Market, Experian or Money Supermarket to find the best consolidation loan for you.

Get free debt advice

If you’re struggling to cover the minimum payments on your credit cards or are finding yourself using your credit cards to pay for essentials each month, you should seek free debt advice. Contact us here for free support.