How to get out of credit card debt

Step 1: stop the balance growing

Nothing below works while new spending lands on the same card. Remove the cards from your wallet and from saved payment details, and use a debit card for day-to-day spending.

Interest accrues daily on the balance outstanding, so new purchases raise the base every subsequent day's interest is charged on. Adding £200 a month to a card you are clearing cancels most of a £250 payment.

Step 2: get the real numbers on one page

For each card: balance, APR, minimum payment, statement date. Most people have never seen these together, and doing so usually shows that one card is doing far more damage than its balance suggests.

Then find the figure everything depends on: what you can pay in total each month, without fail — the number you can hold through a bad month, not your best month.

Step 3: see where the current path leads

Put a balance, its APR and your current payment into the credit card interest calculator, with the payment set to the minimum.

The answer — often over a decade, and more interest than the original debt — is what the minimum payment is designed to produce. Seeing it is what makes the next step feel worth doing.

Step 4: fix the payment, then pick an order

Set your total monthly payment at the figure from step 2 and hold it there as balances fall.

This is the biggest lever available and it costs nothing. Minimum payments shrink as debt shrinks; if your payment shrinks with them, the last third of the payoff takes years. Holding it flat means each cleared card frees its payment for the next one.

Then choose which card receives everything above the minimums — see snowball vs avalanche, and run both on your figures with the debt payoff calculator.

Step 5: check whether a transfer helps

A 0% balance transfer card moves the debt to a card charging no interest for a set period, usually for a fee of a few percent of the amount transferred.

Before you commit:

• Divide the balance by the number of 0% months. If that monthly figure is unaffordable, you will still have a balance when the rate reverts.
• Check the transfer fee against the interest you would otherwise pay — the APR calculator can help you compare the total cost.
• Note the reversion APR and the date.
• Keep making at least the minimum. Missing one can cancel the 0% deal.
• Do not spend on the new card — purchases usually attract the standard rate, and payment allocation rules mean your payments go to the highest-rate balance first, which is not necessarily the one you want cleared.

Eligibility checkers let you see your likely acceptance and the offered term without a hard search. Use one before applying.

Persistent debt rules

FCA rules require credit card firms to intervene where a customer is in persistent debt — broadly, where over an 18-month period you have paid more in interest, fees and charges than you have repaid of the principal.

Your lender must contact you and prompt you to increase payments. If the position continues over a longer period, the firm must propose ways to repay the balance more quickly and, if you cannot afford any of them, offer forbearance — which may include reducing, waiving or cancelling interest and charges.

If you receive one of these letters, do not ignore it. It is the trigger for help you are entitled to.

If the minimums are already unaffordable

Contact your lender before missing a payment. FCA rules require firms to treat customers in financial difficulty fairly, and options are far more available in advance than after default.

Get free debt advice. MoneyHelper, Citizens Advice, StepChange and National Debtline all provide it at no cost, and can help with debt management plans, and where appropriate with an IVA, a Debt Relief Order or bankruptcy.

Be wary of anyone charging. Commercial debt management firms charge fees for what the charities do free. If a firm asks for money upfront to deal with your debts, go to one of the charities instead.

Afterwards

Keep the cards open. Closing them removes their limits from your total available credit, which raises your credit utilisation on anything remaining — at exactly the moment you have finished repairing it.

Then redirect the payment into a starter emergency fund. The usual reason people end up back in card debt is that the next unexpected bill had nowhere else to go.