Outstanding payments on credit cards grow by 10%- the best ways to pay off your credit card debts

Outstanding balances on credit cards have grown by almost 10% annually, as UK Finance releases it’s figures about card spending in January of this year.

As well as covering the monthly value and volume of transactions across debit and credit cards, both in the UK and of UK-issued cards across the world, the data also covers outstanding balances on credit cards, card issuance and contactless payments.

UK Finance found that outstanding balances on credit card accounts have grown by 9.4% over the past year, and 50.5% of outstanding balances had interest compared to 51.3% in January 2023.

There were also 1.93 billion debit and credit card transactions in the UK in January, which is 2.6% more than in January 2023. However, the total spend of £71.5 billion was 0.8% lower than January 2023.

Janine Randolph, Head of Data Management at UK Finance, explained: “The total amount of credit card balances outstanding continued to grow in January, but at a more moderate pace.

“Balance transfer activity hit a ten-year high, contributing to the growth in gross lending. It also meant that the volume of balances incurring interest fell slightly year-on-year. This shows us that consumers are taking advantage of lenders’ competitive balance transfer offers and paying down their outstanding balances. As such, we haven’t seen signs of a fall in consumers’ ability to make their credit card repayments.”

Best ways to pay off your credit card:

Pay by direct debit: Setting up a Direct Debit for your credit card payments will make sure you never forget to pay. It also means you won’t be charged a late payment fee.

Pay more than the minimum: Minimum monthly repayments can be very low, and if you only pay the minimum for 18 months, your credit card provider will contact you. This is because you’re likely to be in ‘persistent debt’ – when you’re being charged more in interest and fees and than you’ve repaid in the last 18 months. The best thing to do is to aim to pay off the entire bill each month, to avoid paying interest. If you can’t do this, pay off as much as you can.

Prioritise your repayments: If you owe money on more than one type of credit, paying the one with the highest interest rate first would be beneficial. But if you’ve got debt secured against your house, for example, make sure you pay these first. This is because the consequences of not paying can be much worse.

How people in different situations should deal with credit card debt

The best way to tackle credit card debt will depend on your personal situation. Things like your credit rating and how much disposable income you have will affect the options open to you. Here are six ways to deal with credit card debt for people in different situations.

People with a good credit rating

If you have a good credit rating, there are a few options open to you that could help you cut the amount of interest you pay on your credit card debt. Take advantage of a 0% balance transfer credit card If you’re shelling out for interest on credit card debt, see if you can get a 0% balance transfer deal.

These offers let you freeze interest for up to 30 months. This should let you reduce your debt faster, as all your payments will go towards the debt, and nothing will be spent on interest. For this option to be worthwhile, you’ll need enough time to clear your debt in full and at a price that makes sense.

There will usually be a balance transfer fee of up to 5% to pay.

Look for a low-interest credit card If you’re unlikely to pay off the full amount you owe before the end of a 0% balance transfer deal, a low-interest credit card may be a better option for you. A low-interest credit card offers a relatively low interest rate on purchases and/or balance transfers for as long as you keep the card.

You can get deals that charge as little as 10.9% APR. With these cards, there’s no need to switch because an introductory offer has ended. This can make it easier to budget.

People with multiple cards

If you have more than one credit card, you may be making similar payments towards them all. But this isn’t necessarily the best strategy.

Deal with the costliest card first If you have more than one credit card, you can reduce the amount of interest you pay by clearing the most expensive debt first. For example, if you have a card charging 21% APR and eight months left of a 0% deal on another, start by paying off the one that’s hammering you with interest charges.

People who can afford to make cutbacks elsewhere

If you’re in a position to cut your spending in other areas, it may be a good idea to do this until your credit card debt is paid off. Increase your payments By making cutbacks elsewhere, you’ll be able to up your monthly credit card repayments.

Paying as much as you can rather than just the minimum amount will help you pay off your credit card debt sooner and reduce the total amount of interest you’re charged.

People with a poor credit history and very little disposable income

If you have a poor credit history and no - or very little - disposable income, you’re unlikely to be able to get a 0% balance transfer deal or a low-interest credit card. You’re also likely to find it difficult to increase your monthly repayments. If you’re in this situation, it’s time to get help.

See if your provider can offer help Lenders have a responsibility to help customers who have been struggling with continuous debt for some time. After 18 months, they must warn customers that they may not be managing their money in the best way.

After another 18 months, credit card providers are required to offer customers a way of repaying their balance in a reasonable amount of time. They may do this by reducing or freezing interest and/or charges. It’s important to remember that if you contact your provider, they may decide to stop you from borrowing any more on your credit card.

Get debt advice

If you’re struggling with your credit card repayments, it’s a good idea to get debt advice before your situation gets worse. We can help you with budgeting, making sure you’re claiming all the benefits you’re entitled to and advising you on the different debt solutions that are available. You may be surprised at the range of help that’s on offer for people struggling with debt.

Lydia Bell-Jones

With a background in banking, Lydia has been writing professionally for over five years. She is passionate about helping people improve their personal finances and has a particular interest in the connection between money and mental health.

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