Credit cards can be a valuable tool for managing your money – but only if they’re used responsibly.
Unfortunately, many people feel tempted to spend more than they can actually afford, and a credit card is one of the more expensive ways to borrow cash you don’t have.
If you start to fall behind with your credit card payments, it’s important to remember that the longer you continue to only make the minimum payment on your credit card, or not make payments at all, the more interest is added to your balance.
How can I pay off my credit card?
The best thing to do if you’re struggling with credit card debt is to stop using the card straight away and contact your provider to let them know.
If you’re struggling with making payments towards your credit card debt, it’s important that you stop using the card straight away and let your provider know. If you are open and honest about the fact that you are struggling, you may be able to arrange a payment plan before the situation gets out of control.
If you’re only making the minimum payment, your credit card company will write to you asking to pay more to try and get you out of what’s known as ‘persistent debt’.
By setting yourself a realistic and manageable budget that you can easily stick to, you’ll be able to pay off your credit card faster.
Will credit card debt affect my credit score?
How much credit you borrow and how well you manage to pay it off will definitely reflect on your credit score. Your credit card provider will share details of your account activity with credit reference agencies which then allow them to update your credit score. It will also be noted on your credit file, which will show how much you owe, how many payments you’ve made, if you’ve defaulted and details of your credit limit.
What are minimum card payments?
Minimum card payments, or minimum card spend, is the lowest amount a customer can spend before a retailer will accept a debit or credit card payment. In most cases, you’ll experience minimum card payment in shops that are independently run, like corner shops or cafes.
Interest rates on credit cards
Interest rates will vary across providers, usually ranging between 10-70%, but sometimes higher.
How much the rate will be will depend on the type of credit card you’re applying/approved for, which is usually determined by your credit score.
Some providers may offer you an ‘interest-free period’ on purchases, meaning if you buy anything with that card within that time then you won’t be charged any interest – as long as you pay it before the period ends.
If you have missed payments to your credit card, you’ll likely find that you’ve been charged on top of the interest as a kind of late payment fee. The amount differs from one provider to another but is never usually more than £12 per missed payment.