Managing credit card debt


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Hello! Today we’re looking at how to manage the tricky situation where debt becomes a problem. This article focuses specifically on credit card debt as it’s often this that’s frequently experiences and a gateway to other issues – but the principles in this guide can be applied to all types of debt.

Before you get too comfy settling in to this post it may be worth going back and reading our article on why you should pay the minimum on your credit card as a couple of concepts from that article will be relevant here.

Ah, you’re back! Good, let’s get settled down.

As ever – our normal note that we take care with what we write on this site but it is not official “financial advice” and any actions you take are general suggestions rather than tailored to your specific circumstances. We always suggest doing your own further research. If you’re in doubt about anything, it’s worth consulting a professional who can help deal with a personal situation.

Mentally dealing with Credit Card Debt

The first and most important thing if you’re struggling with credit card debt is don’t panic. It can sometimes feel those bills are insurmountable but today we’re going to show that there are some really practical things we can do to start to dig our way out. But let’s be real – this is going to require commitment and some difficult choices.

Sometimes it can be a challenge to just start dealing with the problem of credit card debt as it can feel overwhelming – but having a plan and knowing you’re dealing with the problem itself can be an immediate relief.

If your debt situation is severe:

Debt can be mentally tough to deal with as well, but very difficult to talk about because it can be tied with very negative emotions. If you have good friends and family in your life I can only recommend discussing your situation honestly to them – it may seem daunting and you may think that people will judge you.

In practice you’ll often find that people are often far more supportive and caring than you’d ever think.

If you don’t have other support and you just need someone to speak to then The Samaritans ( are a wonderful organisation. They are UK focused but for international readers there are similar organisations worldwide. Just remember it’s important to talk and in any case always keep in mind……

You are awesome and no problem is insurmountable with thought and planning.

A lady managing credit card debt successfully

How to construct a plan to reduce Credit Card Debt

So let’s tackle this! Credit card debt is a monster and like fighting any monster you need a plan. Ours is three phase:

  1. We’ll focus first on trying to stop credit card debt getting bigger
  2. Then we’ll prioritize attacking the credit card debt where it can do most damage.
  3. And then we’ll chip away at the credit card debt until it’s dead.

The best thing about this plan is that it’s all practical things that can done by you and relying on no-one else to fix things.

I’ve been horrified when researching this article by how many services are out there claiming to be magic bullet fixes which are often anything but – so caution is needed when researching debt online and I’ll cover some reputable resources further down this article.

Build a complete view of your outstanding credit card debt

To get on top of things, we first need to know what we’re dealing with. If you have debt on multiple credit cards, find your last account statement for each. Try and list out the following three items, all of which should hopefully be clearly marked on your statement.

  • The amount we owe on this card
  • What the credit limit is on the card.
  • What the APR rate is. (The APR determines your interest payment – I.E the extra the card company will charge you for your outstanding balance). To translate this – if you have £100 on your credit card bill and the APR is 21%, you will be paying £21 in interest a year.

Now you’ll always need to pay back what you’ve spent, but what we’re going to do first is make sure that the interest payments on your credit card debt don’t get bigger.

Explore options that reduce credit card debt interest payments

So we want to try and cut those interest payments to zero or as close to as possible to stop the debt growing whilst we tackle it.

It may not be possible to do so but there’s a few things we can give a try to help out the situation and should be the first port of all.

See if you can get a zero-interest balance transfer on your credit card debt

Now it may seem odd to say given credit cards have caused the debt in the first place to suggest taking another one.

However in order to try and win your custom card providers sometimes offer a period of zero interest balance transfers. What this means it that you transfer your existing debt to a new card, but don’t pay interest on that balance for a short time. We can use that offer in our favor.

There are are some important warnings with this tool:

  1. After the interest free period ends, you will again pay interest at a stated APR. This can sometimes be punitive on such cards, so you need to take care to ensure you can clear the balance as much as possible and make sure you choose an account that minimizes that future APR as much as possible. (Top Tip: Make a note and reminder of a month before the interest free period ends, to see if you can balance transfer again if so).
  2. The cards with interest free balances may not be available to you if your credit score has taken a hit. As failed applications for a card can hit this further, it’s worth using an eligibility checker (available at all the linked websites below) before applying. Don’t be discouraged if this answer is no – there’s other options.
  3. NEVER get the zero interest card and think of this as a handy opportunity to provide more cash/credit. It’s used here only as a useful debt management tool.

We maintain a guide here to what we consider the best balance transfer credit cards available.

If you can get an interest free balance transfer and the credit limit covers you full debt, jump to Stage 3. If not, try this:

Call your credit card company about your credit card debt

The next thing I advise doing is to call anyone you have credit card debt with and ask if they have any lower APR’s or promotional rates that you can take advantage of, making clear that you are looking to do this to help manage your finances better and pay your debts.

They may say no, but it does no harm and I’ve seen some reported successes. From the perspective of the credit card company giving some space and you paying back the credit card debt is a better outcome that being forced to declare bankruptcy and being completely unable to settle any debt.

Rearrange and prioritize your debt

Remember that table we wrote down of your debts above? If you got an interest free balance card add it to the list or adjust what the APR’s is if you’ve managed to get a better rate on one of your other cards.

The result probably looks a little like this:

CardDebtCredit LimitAPR

We need to move the debt around as much as we can so it’s as cheap as possible.

Whilst Card 2 has a high credit limit, it’s the most expensive card to borrow on. As a result, this is the card we should try and clear as the first priority.

In short: We want as much as possible on cards with a low APR and as little as possible on cards with a high APR.

So in the above example I’d do the following:

  • Card 2 is the most expensive, so I want to get debts off that first. Card 1 is the cheapest, and is not at the credit limit.
  • I therefore move £1,500 from Card 2 to Card 1 to max out the limit, reducing the balance on expensive card 2.
  • Ideally I’d put it all on Card 1 but that’s maxed out. However, Card 3 is still cheaper than Card 2 so I can transfer an additional £1,000 to that.

This leaves us in the following situation: we’ve still got debt on expensive Card 2, so as we tackle the debt, all our efforts should go into paying this off first as it’s costing us the most. Then we move on to clear Card 3 next and onwards! The nice thing about this strategy is that it starts off hard, but gets that little bit easier over time.

A rejigged table after what I’ve done above shows the changes.

CardDebtCredit LimitAPRPriority

Now we need to manage the debt down.

Budgeting ruthlessly to clear debt

We now need to ensure we have some money to pay off the debts. There are a number of ways to budget, but The Financial Wilderness recommends this as a basic approach:

Step 1: Get your last three bank statements and credit card bills, and gather any information you have on either incoming money or spending that’s not listed on these.

Step 2: Now let’s categorize that spending. Anything that meets your basic needs (I.E food and rent) gets classified as essential spending. Anything else (entertainment, gifts, toys) gets classified as additional spending.

Start with the additional spending. For the period you’re trying to get out of debt, we need to minimize this as much as possible. The majority of this is a psychological battle – often this spending will be tied to what we’re doing with friends or our children and we don’t want to feel left out or like we’re letting people down. It’s really important for our well-being to maintain those connections, but there’s so many great things we can do that are free or cost little.

Go for a long walk and talk, or break out some old school games. You may be shocked at how much you and friends enjoy this! If faced with social pressure – it’s fine to make your excuses. True friends won’t mind if you’re “doing things differently for a little while”. I really like this article from Edubirdie on a money free weekend to provide some ideas.

Now let’s look at the essential spending. This should always be your priority – you need to make sure you and family have a roof over your head. Have a long think about if there’s anything you can do to minimize these. As a few suggestions temporary use of a food bank may help food costs. If you eat out or get takeaways, there are some great recipes and tutorials on line that can teach you how to cook – treat it as a new challenge! Rent is probably the largest cost – if you can temporarily move in with a family or friends whilst you get yourself sorted, or even move somewhere slightly cheaper and make it work this can make a huge difference.

Step 3: Keep checking other tips on The Financial Wilderness and other sites. We have a growing group of articles in our moneysaving section on how to save on household bills.

Step 4: Keep chipping away at these until you’re in a position you can find some money at the end of the month to pay back those debts.

I’ll be honest – this bit of the guide is easy to write about and read, harder to do. Life is going to be difficult through this period. Just keep the focus…..the pain now means freedom and flexibility later.

The more you can have at the end of each month to pay back the better.

A wall noting that credit card debt will tear us apart.

Stop using credit cards except for emergencies

If you’ve found yourself in a credit card debt hole, The Financial Wilderness recommends going for shock therapy – take those credit cards and lock them away in a drawer.

When you’re managing your way out of debt go against society right now and try and do as many payments with cash as possible. Physiologically it’s much easiest to be aware of your cash management when you have to physically hand it over, and keep to a budget if it’s literally all you have in your wallet.

Keep a debit card on hand for emergencies or times you can’t use cash, but be very strict with yourself this is it’s only use. If you’ve followed the budgeting tips above, you might have an idea of how much you’ll allow yourself to put in your wallet to get where you want to be.

It’s a battle, and it will possibly be a long battle. But it’s worth the fight. Good luck – you can do this.

Good resources for debt management:

The Citizens Advice Bureau have a wider range of explanatory pages and resources online:

The Money Advice Service is a Government run resources that can link to other advice and recommend reputable services:

Debt Camel is written by fellow money blogger Sara and is an absolute wealth of information and resources on effective debt management.

We do not recommend searching Google for debt solutions on credit card debt – sadly, many of the websites claiming to offer debt packages makes problems worse not better – it’s a real minefield so start with the above first.

Any questions?

We can’t easily answer questions on your individual circumstances, but if you have any questions on the guide above please let us know in the comments below.

We’d also really love to know if you’ve had success managing your credit card debt down – it’s a story that always makes us so happy to hear!

And that’s it!

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