How to clear your credit cards

If you’ve overstretched yourself on a number of credit cards, we reveal a method to help you pay back what you owe more easily.

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One way to deal with large credit card balances is to shift as much of it as possible over to a 0% balance transfer card.

For example, if you moved your balance to Sainsbury’s Balance Transfer card, you wouldn’t have to pay interest for 30 months. After this, you’ll pay 19.95% pa (variable), so try to clear your balance before then.

Bear in mind there is a transfer fee of 3% (minimum £3) for transfers made at application. After this, the fee will depend on your current offer.

The card has a representative rate of 19.9% APR (variable)*, although the rate you are offered will depend on your individual circumstances.

If you need longer to clear your debt, you could use a low APR credit card instead. For example, the Lloyds Bank balance transfer card has a representative rate of 6.4% APR (variable)** and no transfer fee, so long as you make your transfers within the first 90 days (after this you’ll pay a 3% fee).

But the major drawback with all of these cards – and others like it – is that you'll need a good credit rating to get accepted. As a result, not everyone will be able to get hold of one and you may have to stick with your existing cards.

If this is the case, don’t panic – below, we show you one option that might help.

How to clear your cards

If you have spent on a number of different cards, it can feel like an impossible task trying to pay back all that you owe. But with a bit of planning and organisation, you can make a good start.

To get the ball rolling you need to work out exactly how much debt you have on each credit card and what the representative annual percentage rate (APR) is on the cards.

For example, let's say you have three credit cards.

  • You have a balance of £3,000 on card X which has a representative annual percentage rate (APR) of 20%
  • You have a balance of £5,000 on card Y which has a representative APR of 15%
  • You have a balance of £2,000 on card Z which has a representative APR of 9%

Focus on the card that has the highest representative APR first – in this case, card X at 20%. This is the card that will be building up the most interest, so it's the one you want to pay off the quickest.

Rather than paying off the minimum repayment each month, throw as much money as you can afford to towards card X.

But don't forget about card Y and card Z. You will still need to make the minimum monthly repayments on these cards, otherwise you'll be charged for missed payments and it could negatively impact your credit rating.

Once you have cleared card X, you can move onto the card with the second highest APR – in this case, card Y at 15%. Again, pay off as much as you can each month, keeping enough aside to pay the minimum monthly amount on card Z.

Once you have cleared card Y, you can move onto card Z. Clear that card and you’ll have paid back all that you owe.

How quickly will I pay off my cards?

How quickly you clear your credit card debt will depend on:

  • the number of credit cards you have
  • the amount you owe
  • the amount you pay towards the cards each month
  • whether you have missed payments
  • the APRs the cards charge.

The more you can put towards your most expensive credit card debt, the quicker you will pay it off and the less you’ll pay in interest.

Using our calculator, if you were to put £100 a month towards your balance of £3,000 on card X, with its APR of 20%, it would take you three years and five months to pay off what you owe in full. And you’d pay £1,047 in interest.

If, however, you were to increase your payment on card X to £150 a month, it would take you two years and one month to pay off the card, and you’d pay £609 in interest.

But while it's well worth upping your monthly repayments as much as you can, there are some debts that take priority over your credit card debts and these should not be forgotten.

For example, your mortgage or rent is a priority debt because if you don't keep up with your payments, you could ultimately lose the roof over your head. So don't start paying off hundreds of pounds a month on your credit card debts if it means your mortgage payments suffer.

Council tax payments, gas and electricity bills, your TV licence, secured loans and child support should also come first.

You can use the above method on a variety of debts including overdrafts and personal loans. But bear in mind, with personal loans, payments are not flexible and monthly payments are usually fixed – so you won't be able to pay more than this.

Whatever your reason, if you’re struggling with any kind of debt, it’s a good idea to talk to a free debt charity such as StepChange or Citizens Advice.

*Representative example: If you spend £1,200 at a purchase interest rate of 20.9% pa (variable) your representative rate will be 20.9% APR (variable).

** Representative example: If you spend £1,200 at a purchase interest rate of 6.45% pa (variable) your representative rate will be 6.4% APR (variable).

All credit cards are subject to status and terms and conditions. Over 18s, UK residents only. Terms and conditions apply. See MoneySuperMarket.com for further information.

MoneySuperMarket is a credit broker - this means we'll show you products offered by lenders. We never take a fee from customers for this broking service. Instead we are usually paid a commission by the lenders - though the size of that payment doesn't affect how we show products to customers.

Please note: Any rates or deals mentioned in this article were available at the time of writing.

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