“I have three credit cards, all maxed out.
I am only paying the minimum amounts each month as I can’t afford more.
What are my options as this will take forever and cost a lot in interest?”
A lot of people are in this situation in 2024, with cost of living price rises leaving you with no spare money to make overpayments. Especially if a 0% balance transfer has ended and you can’t get another one.
This also applies to store cards and catalogue accounts.
And many cards have been increasing their interest rates. That makes the minimum payments even larger and your position harder.
Your options depend on how good the rest of your finances are.
Contents
Worst case – you can’t really afford the minimums
It can be difficult to see the big picture when you are juggling incomes, bills and debts at different times of the month.
If you have energy debts or it’s hard to pay the rent/mortgage, then the interest on these maxed-out credit cards may be annoying but you have a much bigger priority debt problem.
A good way to check that the minimums are affordable is to stop using the cards completely for a couple of months:
- leave them at home;
- remove them from Google Pay and Apple Wallet
- take them off Amazon, Paypal and any other online shopping sites;
- don’t use any other credit in this time – no Klarna or other Buy Now Pay Later.
If you can only manage this by getting behind with some bills or going deeper into your overdraft, then the minimums are not affordable.
You could look at making payment arrangements with the cards, but a simpler alternative may be a Debt Management Plan. A DMP has the same effect on your credit record as payment arrangements.
I suggest you talk to a good debt adviser now about all your options. The sooner you do this, the more options you may have to choose from. Delaying may mean you get deeper into debt.
Middle case – you can afford the minimums
Paying a credit card, store card or catalogue off at the minimum amounts takes a very long while – 15, 20 years or more. And costs a fortune in interest.
So how can you speed this up if you can’t pay large amounts off the cards?
What I am going to suggest only works if you can stop using the cards. Completely. If you can, do these two things.
1) fix the payments to the cards
When you pay the minimums, they drop by a tiny amount every month. Not enough for you to enjoy feeling you have extra money, but enough so that you are kept trapped in debt for much longer. See the Credit card minimum payment trap for details about this.
You can escape from this trap by paying a fixed amount every month.
So set up a standing order for each of the three accounts. Make this for the minimum payment on the account rounded up – £32.10 up to £33 say. If you think you can push that to £35 even better!
By doing this the cards will get cleared years sooner and you will pay astonishingly less in interest.
It also makes it easier to think about your budget as you are paying the same amount every month.
And soon the cards won’t be maxed out anymore. Your credit score will start improving as your credit utilisation drops.
2) start using a stealth savings app
A stealth savings app such as Plum looks at your bank account and quietly takes a few small amounts several times a month when it can see that you won’t need that money.
By the end of the month, you may have a small amount saved up without noticing it. It’s a painless way to save.
Then at the end of every month, you can pay the amount saved off one of the cards. Go for the highest-interest account. Or if they are all much the same, the account with the lowest balance.
This payment is in addition to your normal standing order, which is covering all the interest. So this extra money is all coming off the amount owed.
If you have a difficult month, then there may not be any money saved this way. But being able to do this most months can really help clear those credit cards, store cards and catalogue accounts fast.
Best case – with a great credit score
With maxed-out credit cards, often this will be tricky, because a high credit utilisation affects your credit score.
But if you still have a great credit score, then look at getting a 0% balance transfer card. This will mean your monthly payments are all clearing the debts, not just paying interest.
MoneySavingExpert has a guide to 0% balance transfers with an eligibility checker. It’s important you don’t just apply for a great-sounding offer and then get rejected – that just makes the next application a bit harder.
Balance transfer cards aren’t as easy to get as they used to be. You may only be given one with a short term. Don’t think of this as “free money” but try to clear as much as possible, so you don’t then have a problem when the 0% ends.
For other tips about these deals and how to make them work for you, not the card lender, see Getting a 0% balance transfer.
You could also look at getting a consolidation loan. But unless you can get a very cheap bank loan, the monthly repayments can be more than the minimums on the cards… so then you may struggle to afford the loan. And with rising mortgage rates, getting a secured loan to consolidate debt in 2023 looks dangerous.
If you do consolidate these credit cards, you must close the accounts, or soon you will probably spend on them and have a lot more debt.
Also… have your credit limits been set too high?
It’s worth stepping back and looking at your situation and how it has arisen.
If your problems came when you lost your job or had a baby so childcare costs now take up a lot of your salary, then this isn’t realy the credit card lenders fault if they gave you the large credit limits before your problems.
But if you have been given credit limit increases at a time when you were only making the minimum payments, and the limit is now just too high to be manageable, then look at making an affordability complaint. If you win a complaint you will get some interest refunded which will reduce your balance. And this doesn’t hurt your credit score.
Consolidating with bad credit?
Thinking about a debt management plan?
Could a Debt Relief order help you?
Ebony says
Hi you have a typing mistake stating that Payplan is an online shopping site think you mean PayPal!!!!
Sara (Debt Camel) says
thanks – corrected!
Liam Attrill says
Hi Sara
I went into a debt relief order due to my health situation I am still waiting on PIP assessment which will probably have to be appealed.
Now my wife has a credit card with £3000 of debt where we can only make the minimum payment at best and that’s not factoring in additional costs of living going up and having to use discretionary housing payment support.
The card with £3000 on as part of a money transfer to clear down another card making use of the 0% money transfer over six months.
My question is is it better to just default or try and set up a payment plan we don’t intend on taking out really any further credit in the foreseeable future certainly not a mortgage etc and would this affect the other credit facilities she holds?
Thank you
Sara (Debt Camel) says
what other debts does she have apart from this one? Just unused credit lines or any that she is repaying?
Liam Attrill says
Well 2 unused and one is used for paying bills each month that gets cleared each month.
Sara (Debt Camel) says
Ignoring a debt and letting it default just builds up more trouble later. I would suggest a payment arrangement, for only 31 if you can’t manage more – taking into account the April price increases for energy, broadband, mobile etc
If you need a DHP at the moment, then your household situation sounds very difficult. If you don’t think she can really afford anything, then it may be better for her to get a debt releief order as well.
Liam Attrill says
There is also car/sofa finance but need these etc it really is just this one card/debt abs the rest would be manageable
Sara (Debt Camel) says
then offer a token payment to the card. Car finance, rent, council tax etc are all priority debts.
Liam Attrill says
Ok, thanks. What if they don’t accept it? Not sure really what to offer so they accept although as I say things are due to go up so hard to do much other than as minimum a payment as possible
Thanks again
Sara (Debt Camel) says
Why doesn’t she talk to National Debtline on 0808 808 4000. She could explain the situation and they will help her draw up an income & expenditure form she can show the debt collector, proving what she can afford. It would be pretty unusual for them to reject an offer with that.
Liam Attrill says
Ok thanks Sara that’s helpful
John says
I was very, very lucky. Out of the blue, Sainsbury bank agreed for a 10k loan at not so steep 14.9%, apr. “Eligibilty” was between 0-10%. Pure luck! That was sufficient to pay back full overdraft and CCs with aprs nearly at 40%. Six months on, my credit score went up from very low “fair”, to the solid, upper “good”. Even tried agreement in principle for mortgage! Now, each month I feel my debt is realistically going down. It’s all about a bit of luck and cc utilisation. My advice? Check creditkarma, clearscore and creditclub each week. And remember that 400 debt on 500 limit, in banks eyes is much worse than 3000 debt on £10k limit
Sara (Debt Camel) says
And remember that 400 debt on 500 limit, in banks eyes is much worse than 3000 debt on 10k limit
Well yes for your credit score. But not for affordability calculations, which are just as important.
It’s perfectly possible to have an excellent credit score and be unable to get more credit if the lender thinks you already have too much debt.
Consolidating works well if you are able to not use the now freed up cards and overdraft again. Otherwise in a years time you have the large loan and your other debts are once again building up.
Sam says
Thanks for this article Sara. I have a question, I have 2 credit cards, both at 95-97% utilisation (its impacting my credit score too). With cost of living issues I’ve been using the cards to buy food, petrol, gas/electricity sometimes(I’m on prepayment meters at my rented property). I totally get this is the wrong way to use credit but I end up stuck each month because the interest is 40% on my credit cards, and I go between payments to cards, then using it for essentials again no choice. I’m paying more than minimum on both cards each month but am stuck in cycle. I have tried getting 0% balance transfers but getting rejected on soft searches for any cards. What I found when I took out my 2nd credit card 18mths ago was that you don’t get told the credit limit they’ll give you till you apply then I found the credit limit wasn’t enough to cover the balance on my 1st credit card, so that’s where things have gotten in a mess for me. My question is, is there someone I can go to see in person to help me get a plan together to get out of this trap, it’s been affecting my mental health. (It’s not too complicated I think, my credit file looks good other than my credit card utilisation) but I just can’t see the way out, and my life is really affected by this everyday.
Sara (Debt Camel) says
You can go to your local citizens advice if you want to see someone in person.
It you could contact StepChange and get a debt management plan set up. That’s gets interest halted on your cards. See https://debtcamel.co.uk/debt-options/guide-to-dmps/
It’s very unlike that there is an option that will protect your credit score – but in your situation your good credit score – but it isn’t actually doing you any good. You can’t borrow your way out of this mess. You can’t afford the minimum payments if you are having to spend on the cards for essentials. You have to make lower payments and that will harm your score.
Sam Jones says
Thank you Sara. I will seek out CAB in person, call national debt line and cut back on more spending somehow for 12mths making those payments to the highest interest credit card first. Hopefully after 12mths I can see some improvements. Thankfully summer is almost here so that’s a saving on gas which for me tripled in past 12mths. Thank you Sara, I appreciate you.