Managing credit card debt

Last Updated on 5 January 2021 by Dan

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.

Mentally Dealing with Credit Card Debt

The first and most important thing if you’re struggling with credit 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. Just having a plan will make you feel better.

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 just need someone to speak to 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……

How to construct a plan to reduce debt

So let’s tackle this! 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 it getting bigger
  2. Then we’ll prioritize attacking where it can do most damage.
  3. And then we’ll chip away at it 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.

Stage 1: Build a complete view of the outstanding 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 obviously, but what we’re going to do first is make sure that the interest payments on your borrowing don’t get bigger.

Stage 2: Explore options that reduce 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.

See if you can get a zero-interest balance transfer

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:

If you can’t get a zero-interest balance transfer or it doesn’t cover your credit limit

The next thing I advise doing is to call each of your remaining card providers and ask if they have any lower APR’s or promotional rates that you can take advantage of. They may say no, but it does no harm and I’ve seen some reported successes.

Stage 3: 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 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.

Stage 4: Budget 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:

  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.
  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.
  3. 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 The Simple Dollar on 100 things you can do on a money free weekend to provide some ideas.
  4. 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.
  5. 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.

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 – 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.

Stage 5: Cut the credit and use of debt

If you’ve found yourself in a 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.

Other Resources on debt:

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:

(Please do remember this article is provided in good faith but the above are potential suggestions only and you should always do your own further research – see the disclaimers policy for more).

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