How to pay off a credit card

How much of your credit card do you have to pay off?

With a credit card, you decide how much to pay off each month.

You can choose to repay:

• The minimum payment amount set by your provider

• The full statement balance

• A set amount you choose – for example, £50 – provided it's more than the minimum amount

Usually, if you pay your bill in full every month, you won’t pay any interest on your credit card.

If you can’t manage the full amount, but to pay off the balance quickly, try to pay off as much as you can each month.

Paying back more means you'll clear the balance quicker and pay less interest on your credit card.

Whatever happens, you have to at least pay off the minimum amount every month.

How do minimum repayments work?

The minimum payment amount is set by your provider and detailed on your monthly credit card statement. It is important to know what your minimum payment is so that you can ensure you make the payment on time each month.

It can either be a set monetary amount or a percentage of the balance, whichever is greater.

Since April 2011, the minimum amount must be at least 1% of the balance plus any interest or charges.

If you do not meet the minimum repayment, you may receive a fine.

If you miss a minimum payment altogether, you could:

• Lose out on your promotional offer (like 0% interest)

• Have to pay a charge

• Get a mark on your credit record, which affects your score and your chances of getting credit in the future

Should I pay more than the minimum amount?

In short, yes. Paying more than the minimum amount each month will reduce your credit balance more quickly, which will decrease the amount of interest that you pay. The more you can pay towards your balance each month, the sooner you will reduce what you owe. 

Paying more than the minimum amount will also help improve your credit utilisation, which can be a factor that lenders consider when determining whether to lend to you.

Can you avoid paying interest on credit card debt?

You can get the benefits of a credit card - which include boosting your credit score and building a credit history for the future - without paying any interest on credit card debt. By clearing the credit card balance in full each month, you can avoid paying any interest on borrowing.

The easiest way to ensure you clear the balance and avoid interest charges is to set up a direct debit payment. A direct debit to repay the full balance will automatically pay off your credit card balance each month.

How to repay your credit card

There are several options for how to repay your credit card. You can pay off your credit card by:

• Setting up a direct debit

• Using your debit card to pay online or by phone

• Paying in person if your provider has a nearby branch or the Post Office lets you deposit funds

• Sending a cheque to your credit card provider

• Transferring money from your online banking to your credit card provider

The benefit of setting up a direct debit is that you'll never miss a payment. To avoid going into your overdraft, make sure there's enough money in the account the direct debit is coming from.

For more details on the different options for making credit card repayments, here's how to manage your credit card.

How to save money on your repayments

There are many ways that you can reduce the cost of your repayments. You may be able to cut the interest you pay by clearing your balance in the following ways:

• Using your savings

• Getting a balance transfer card

• Paying off the most expensive card first

Use your savings

Interest rates on savings are exceptionally low at the moment. As a result, the interest you pay on your credit card will likely be more than what you earn on your savings. If you are paying a significant amount of interest on credit card debt, consider using savings to reduce your balance.

For example, if you owed £2,000 on a card with an APR of 17%, it would cost £340 in interest each year. If you had £2,000 in savings paying 1.25%, you'd only earn £25 in interest.

Use a balance transfer

You could move what you owe to a cheaper card with a balance transfer credit card.

Many balance transfer cards offer a 0% interest period that can last more than 2 years. You could use this time to repay the balance without paying any interest. Some cards do come with a fee, however. This is normally between 1% and 4% of the amount transferred.

Discover which balance transfer cards you're likely to get with our credit card eligibility checker.

Pay off your most expensive card first

There are various approaches to paying off debt across multiple credit cards. To minimise the interest you pay, aim to pay as much as possible towards the card that is charging the highest rate of interest first.

To avoid paying missed payment fees, continue paying the minimum payments on your other cards.

If you have any small outstanding balances, however, it might boost your motivation to pay off the smallest balance first before tackling the bigger credit card balances.

Or you could try consolidating your debts onto one card. It can be easier to keep track of your payments that way.

Pay it off with a loan (as a last resort)

Some personal loans offer lower interest rates than credit cards. So, it could be cheaper to get a loan to pay off your credit card balance.

But using one debt product to pay off another is not always the best strategy. That said, debt consolidation loans and balance transfer cards are designed for this purpose. Always compare the costs first.

Learn more about how debt consolidation loans work.

If you can’t pay off your credit card

If you are struggling to pay off credit card debt or to meet minimum payment requirements, contact your credit card issuer as soon as possible. The credit card company may be able to pause fees or help you to set up a more affordable monthly payment amount.

There are also several debt charities and non-profit organisations that may be able to help contact lenders and arrange debt management plans to take control of what you owe.