Tips To Manage Credit Card Debt

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Written by Michael Foote, Insurance and Finance Expert

Michael Foote is the founder of Quote Goat and has over 13 years experience working in the finance, insurance and currency sectors. Since launching Quote Goat he has appeared on TV as well as many of the largest online publications including Forbes, The Telegraph and The Metro. Prior to Quote Goat, he worked in finance in the city for a number of firms including HSBC.

If a credit card is managed very well it can be a great way to earn rewards on your purchases, however it can of course also end up costing thousands of pounds over many many years. At Quote Goat we love saving people money and decided to look at tips and tricks on how to keep yourself on the beneficial side of a credit card, or at the very least how to keep your costs down to a minimum.

Discipline! Discipline! Discipline!

Is it necessary to put that three times….? Absolutely. The key to winning at the credit card game is to use your card for everyday purchases, whilst saving your monthly wage to pay off the entire card at the end of each month. This way you pay no interest but you get all the rewards associated with credit cards, this could be Nectar and Clubcard points through to air miles resulting in free flights for your next holiday – not to be sniffed at! The supermarkets usually offer double points for using their credit cards to buy their fuel and their food however make sure you shop around as there are a number of deals to be had.

This is all very well for people with loads of cash, not living from pay-check to pay-check and/or people that are well-disciplined.  However if you are like many of us in the UK, you may find it tempting not to pay off the full balance each month, resulting in you having to pay interest. If this is the case, then you will most likely be paying more interest than you are receiving in rewards – what is the point? Exactly, there is none.

Interest Free Cards

Okay, let’s say you have already been sucked into the trap of building up a healthy debt on your credit card, maybe a couple of shopping sprees, a few nights out, it all adds up. Now you are making minimum payments on your card, most of which is going straight to interest. How are you ever going to pay it off when you have the rent, the bills and the living costs all draining the wage each month, plus the seemingly ever-increasing interest charges from your card company?

There is good news here, but again you will need discipline to pull this little manoeuvre off. Many card providers offer substantial interest-free periods when transferring your current credit card balance to their card. This means that you will shift your balance to the new card provider in return for a charge (usually 3% of the total balance), however you will no longer be paying interest. You will still make a similar sized monthly repayment but this money will go straight to paying off your balance! Woohoo and with 40 months interest-free you should be able to make a massive dent in that debt. Finally, a way out of the seemingly never-ending trap. Not quite, there is one big pitfall here that you need to stay well away from. That naughty original credit card that you got you in this situation in the first place, sitting on your bed side table, now completely empty and begging you to fill it up again. DONT!

The golden rule here is that you must destroy your old credit card once you have done the balance transfer. Do not for any reason keep that card sitting there for the simple reason that if you managed to get yourself a maxed-out card once, and no one is judging here, it is just as easy to get a second one next to it. Go one step further and completely shut the account, once you do, you are safe.

A couple of other points to think about here are make sure you keep your credit limit the same on the second card as you did on the first. If the limit goes up on the second you may be tempted to build up the debt, defeating the object of this exercise. Secondly, have a serious think about ripping up the new card too. You’ll then have no ability to spend on the new card whilst the balance is decreasing, getting you out of debt as quickly as possible.

Credit Card Pro (some serious money skills)

On the basis that there are some super deals on interest free periods for new credit card customers, the most efficient of credit card users have spotted a great way to make a bit of free money, yup, I said free. However it does of course involve that element of discipline. So, how could you do it?

Once you have successfully applied for a new credit card, one that offers a long interest-free period, it is possible to invest that money and make a return on it of a couple of percent, maybe more depending on what you invest in. For example, if you have a £10,000 credit limit and invest that money and make a 5% return (which admittedly is high for the times) you will earn £500 per year from that investment. At the end of the year you can pay off the card and end up £500 richer, effectively earning an extra £40 a month for nothing…well not exactly.

It is a great idea, but you need some serious self control for this to work and you need to remember that investments can go up as well as down. Obviously if you put it in a bank account with a semi-decent savings rate then your money is 100% safe however interest rates as pretty low at the moment for these types of account.


Hopefully this guide will help many of you make a well-informed decision when it comes to credit cards.

Wondering how else to save money? Check out our range of insurance comparison products. There are enough products on the site for the average person to save over £1000 a year so do not miss out!

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