How to clear your credit cards

You can pay many bills by direct debit, which ensures you do not miss a payment - something that will have a negative impact on your credit rating - and will give you some easy payment discipline that you do not need to think about.

When you set up a direct debit for each of your debts you'll be asked to specify the amount you'd like to pay each month; this tends to be either the minimum amount (best avoided unless it's part of your repayment strategy), the full amount, or an amount set by you.

To set up a direct debit, you need to give the instruction to the credit card company, as they will need to request the payment each month from the bank. You will have to sign a form, with your bank account details, and the company will then set up the payment with your bank from the stated bank account. The company will request an amount each month, which is how this differs from a standing order.

Standing orders allow you to set the amount you pay, which means you can set exactly how much is paid off each month, and that way you know you are going to be covering exactly what you want to.

You would set this up with your bank directly, and tell the bank where, when and how much should be paid. You have absolute control over a standing order, and while you can cancel a direct debit with your bank, the company can still make the payment request.

Of course, for both methods you need to be sure you have enough money in your account to cover the cost, otherwise you may be charged an unauthorised overdraft fee by the bank, which will get expensive.

To maximise your own return on the money, perhaps put it into a high-interest account, and ensure it is transferred directly to the account the payment will be taken from before it needs to go. That way, you are making your money work hardest for you and as the funds are taken out of your current account, you'll not be tempted to spend them.

If you try to remember to pay a credit card or loan payment, there is a chance you would forget, or miss it because you cannot afford to pay it - neither is a good option for your finances.