Cut Credit Card Debt: From the ‘just-case’ credit card user to the spend-spend-spend shopaholic most people in Britain own at least one credit card. Dale Lovell offers tips and advice that can help you cut your credit card debt and stay debt-free for life.

While credit cards can be a handy way to pay for many items, the high levels of interest charged by lenders, coupled with enticing spending limits running into the thousands of pounds can lead many to fall into debt.

Below are our top tips on how to cope with credit card debt and ways to cut the amount you owe as fast as possible.

Ways to Cut Credit Card Debt: Switch Credit Cards

If you have run up a massive debt on your current credit card, unless you already have an agreed low level of interest to pay, the chances are a hefty sum of the money you pay each month will go towards the interest on your debt, rather than the actual amount you owe. Big spenders on credit cards mean big money for lenders and most are keen to take on new customers with big debts as it means they can make large amounts of money on the interest. To entice customers away from their current lenders they invariably offer attractive deals such as 0% APR on balance transfers for a fixed time period.

A 0% interest rate for 6 – 12 months is fairly common, and this effectively freezes the amount you owe for a set time period, rather than incurring unnecessary interest each month. By becoming a ‘rate tart’ and switching lenders whenever your low interest rate comes to an end, you could save a fortune in interest rate payments and pay-off your overall credit card debt more quickly. It is estimated that ‘rate tarts’ cost the finance industry over £1 billion a year in unpaid interest rates, and many lenders, such as Capital One and Tesco Personal Finance, are checking up on new applicants to see if they have switched credit cards frequently as a way to try and weed out ‘rate tarts.’

Ways to Cut Credit Card Debt

Other common way lenders try to squeeze money out of potential ‘rate tarts’ is through implementing charges for switching. Many lenders charge a standard fee of £50 for transferring (added on to your new balance), but some charged uncapped fees of two or even three per-cent. Depending on how much you owe on your cards the uncapped fees can prove costly, for example, at the highest rate of 3%, transferring a balance of £5,000 would cost a whopping £150. Check the switching fees a lender charges before switching.

However, with competition in the credit card industry more fierce than ever and numerous lenders to choose from, there are still plenty of opportunities available for debt-laden consumers to lessen their debt if they look carefully at the deals on offer. For the best rates try out the service offered by uSwitch.com.

Ways to Cut Credit Card Debt: Destroy unwanted credit cards

As any self-confessed rate tart will be able to tell you, taking advantage of low interest rates and balance transfers can be a very effective way to pay off credit card debt, however, they are only profitable if you destroy your old credit cards, too. If you regularly change credit cards to take advantage of 0% APR, over the course of a year or two you could quite easily end up with three or more credit cards. While you may have paid off the debt on some of these cards through balance transfers, if a credit card with an available credit limit is in your pocket or purse, the temptation for many people is to use it, racking up debt on all cards. A simple tip: once you get a new credit card destroy any others you may have and notify the lender that you wish to close the account.

Ways to Cut Credit Card Debt: Pay-off as much as you can each month

Interest rates on credit cards are astronomically high compared to most other rates for borrowing; therefore you should try as hard as possible to pay-off as much as you can afford on your cards each month. If you have credit card debts, but are also saving a small amount each month, you would be better off in the long-run putting that money towards paying off your credit card debt before beginning to save. If you can afford it, even by an extra £10 or £20 each month, always pay more than the minimum monthly repayment asked for.

Research by Moneysupermarket.com found that by only paying the minimum monthly repayment on a credit card each month you could quite easily prolong your credit card debt for more than a decade. The company claim that on a typical credit card balance of £2,200 with a standard APR of 13.9%, it would take 26 years to pay off the debt in full if the required minimum payment of 2% was paid each month. What’s more, over that same period, a whopping £2,463 extra would be paid back in interest – more than the initial amount owed.

Ways to Cut Credit Card Debt: Spend less

Hard as it may be for some spendaholics to hear, the best way to get out of debt, and stay debt-free for life, is to spend less. Many people get into unwanted credit card debt as a result of the UK’s ‘have now-pay later’ culture. Research from independent market analysts Datamonitor found that the UK is responsible for a third of all unsecured debt in Western Europe, reaching a staggering £215 billion in 2005. Follow the example set by the French and Germans who have an adverse reaction to debt and try not to spend money they cannot afford. While a Gucci handbag or a Bang & Olufsen 42inch television may look great, for many of us these things are simply unaffordable: don’t be fooled that you can afford something just because you have £4,000 limit on your credit card – you could end up paying more than double for it in interest in years to come.

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