An IVA may not be suitable in all circumstances.
Fees apply to the service, click here for more details. Your credit rating may be affected. Read more about IVAs here.
Using a credit card for spending can have great benefits so it’s easy to see why they are an attractive form of borrowing. Most give protection against credit card fraud, no foreign transaction fees and the opportunity to build your credit score. However, once credit card debt has piled up it can feel like a daunting task to begin to pay it off. Luckily, there are steps you can take to make this process easier.
When you’re struggling with credit card debt, it can sometimes feel as if you’re the only person in the world who’s experiencing this problem. Yet, the reality is very different. Reportedly, the average household in the UK had credit card debt of around £2,600*.
Furthermore, with seemingly ever-climbing interest rates, increasing numbers of families are finding themselves with unmanageable levels of credit card debt**. These aren’t always for non-essential purchases either. Credit cards are frequently used when something needs to be repaired, groceries purchased, or to cover the cost of something unexpected. Regardless, in many cases, credit card debt is unavoidable. Whilst people try to pretend the problem doesn’t exist, you’ve done the right thing by looking to regain control of your finances.
* According to Statista, 'Average credit card debt per household in the United Kingdom (UK) between 2006 and 2019', December 2020. ** According to Equifax, 'The good, the bad and the unmanageable'.
It would take 24 years and 10 months to pay off the average credit card debt if you only made the minimum payments per month.*
*According to The Money Charity, 'The Money Statistics February 2021', February 2021.
Here are some steps which could make paying off your credit debt easier:
Initially, you should consider contacting the credit card company about your debt. In some cases, the organisation might let you put a temporary pause on payments while the debt is resolved. The Consumer Credit Act sets out strict guidelines your lender has to follow when they loan and collect money. Make sure they are following these and that you know your rights.
The average APR on a credit card is around 22.5% in the UK*. However, many credit cards offer much lower rates. Have a shop around for the card with the lowest interest rates and has a 0% balance transfer offer. If your credit card debt isn’t increasing as you pay it off, then you will clear it much quicker.
*According to Moneyfacts, 'How does credit card interest work?', March 2020.
If you have a good credit score you may be able to obtain a balance transfer credit card with a period of interest-free on debt. This means all the money you pay back will go straight towards paying off the money you borrowed and not on interest. However, there is usually a fee to transfer your debt which is around 3% of the balance transferred*.
*According to MoneySavingExpert, 'Balance Transfer Credit Cards', February 2021.
Credit card debt minimum repayments can be set at incredibly low levels. If you only make the minimum repayments, then you will be paying your credit card debt off for years whilst the interest on it continues to grow. If you can afford to pay back the entire bill each month you should. This means you won’t pay any interest and can borrow money interest-free for around forty-five to fifty-nine days. If this isn’t possible, payback what you can and have a budget in place to ensure you pay back a good percentage at the end of every month.
According to Money.co.uk, more than a third (38%) of Britons they polled in 2019 had credit card debt*.
* According to money.co.uk, 'More than half of UK adults will head into 2020 saddled with a personal debt of up to £100,000', December 2019.
As credit cards are classified as ‘non-priority’, they can be handled via a Debt Management Plan (DMP). Typically for smaller debts, a DMP takes multiple sums owned to creditors and consolidates them into an affordable monthly payment. Set up with your approval and getting backing from your creditors, the plan usually lasts until all sums have been repaid.
A consolidation loan could be another good way to pay back your credit card debt, especially if you have multiple credit cards. Credit card consolidation is where you use a consolidation loan to pay back all your creditors, once this is done you will only have one repayment to make at the end of every month. This will usually reduce the rate of interest which you were paying on your credit cards.
Alternatively, for larger bills, an IVA (Individual Voluntary Arrangement) might be more suitable. This shares some similarities with a DMP. For example, it also aims to make multiple debts easier to repay via affordable monthly rates. If approved, the scheme will usually last around five years and – after this – any remaining debts will typically be written off.
If you’re concerned about your credit card debt and feel the problem is becoming unmanageable, then you must get in touch for a no-obligation discussion about your circumstances. Our advisors hear from people struggling under the weight of credit card debt regularly and strive to provide them with the best possible outcome.
Whatever your circumstances, whatever your situation, contact us and we can help find the best solution for you. You can either do this through the application form or by calling 0161 543 3758.
Pay off credit card debt
* As of 10/02/22 20,601 of our customers were in an active IVA. ** Average unsecured debt anticipated to be written off for IVAs approved between 1 January 2021 and 31 December 2021 for FSS customers is £10,645.20, based upon successful completion. *** Based on independent verified reviews from Feefo.
The amount of credit card debt you have will affect the best way to pay it off. If it is anything over £6,000 an IVA might be the right course of action. This would give you a structured plan to pay back the debts over a set period. At the end of the IVA, upon successful completion, any remaining debts would be written off. For personalised advice on how to pay off credit card debt, fill in an application form or by calling [phone_link].
If you pay off your credit card debt at the end of every month then this will be improving your credit score. Pay off the full balance in one go also helps it. However, if you have been missing payments on your credit card and your bank has been demanding them back this will have damaged your credit score. After this, the effect on it will depend on how many missed payments you’ve had and when you start paying them back.
Once credit card debt has been written off, it’s quite common for people to ask whether they can get one again following an IVA. As they’ve had credit cards for so long, the idea of living without one can be scary. After all, it’s nice to have a safety net should problems arise. Although nothing is preventing you from applying for a credit card after an IVA, the arrangement usually lasts on your credit file for six years. Consequently, providers might be reluctant to issue a new card until your credit score improves. While this will take time, your credit file will eventually recover and you’ll be able to apply for a credit card again.