How to pay off credit cards and form a healthy relationship with your money

Want to take control of your borrowing? Here, My Frugal Year’s Clare Seal outlines practical steps and tools for getting started with improving your credit card spending habits.

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Credit card debt is something many of us struggle with, but don’t feel comfortable talking about. As of March 2021, the average credit card debt per UK household was at £2,300, a figure which stands to fluctuate as the world readjusts to living through a pandemic.

Two years ago, Clare Seal – now a financial wellbeing influencer – was in £27,500 of debt, describing it as an “albatross around my neck for such a long time.” From the moment she was handed an interest-free student credit card as a teenager, she along with so many others viewed shopping with plastic as a “coping mechanism for how stressful things got.”

Clare identifies as an “emotional spender”, and has pointed out the issues of cumulative spending: “Once you’ve put a wedding and childcare on credit cards, [smaller purchases] don’t really feel like a big deal”. So, her situation spiralled.

Money was the first thing I thought about when I woke up in the morning and the last thing I thought about before I went to sleep at night,” she says. Things came to a head when she had to have a very frank conversation with her bank about repaying an overdraft. “I just had to tell them there was no money left,” she says. “At that moment, I realised things had to change.”

Clare started documenting her journey out of debt under an anonymous Instagram account, using the social media following she built up to “keep herself accountable.” Now she is working to create a community for women to talk about their experiences with debt and credit cards. 

Here, Clare outlines the most helpful advice she learnt during her journey with debt, so you can improve your relationship with your own credit cards.

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Pull your head out of the sand 

“If you’re less than happy with your spending habits or your credit card balance, the temptation is to ignore it,” she explains. ‘It’s tempting to just make the minimum payments each month and not really think about the balance.”

But unfortunately, facing up to the bigger picture is always going to have to be done, so Clare says it’s best to deal with this as soon as possible after telling yourself that whatever the situation is, it’s solvable.

“You need to bite the bullet – check your credit card balance, and then arm yourself with all of the information,” she says. “Find what your exact balance is, as well as how much of that is interest.” 

Make a clear repayment plan  

When you get your head around repaying any credit card debt, Clare stresses the importance of coming up with a plan that is “tailored to you, your lifestyle, your goals and your priorities”. Everyone’s lives are different, so how and when you pay back your balance will differ from person to person.

“Work out how much you can feasibly afford to pay off each month, and that should give you a good idea of how long it’s going to take you to pay off your balance,” she says.

Clare also advises that when you start out, it may not feel like you’re making much of a dent and the journey you’ve started may seem insurmountable. But she says to remain steadfast, even on the days when it may feel slow going. 

One big factor to bear in mind if you have more than one credit card is to prioritise which one you’re going to repay first. “You can start with the card with the highest interest, which is what will save you the most money in the long term, or you can go by the size of your balance.”

One game plan to emulate is American financial advisor Dave Ramsey’s “snowball method”, where you start with the smallest balance you owe and work your way upwards, gaining “momentum”. Or, Clare recommends tackling the credit card with the highest levels of interest first, to prevent larger levels of interest building up over your repayment period.

Both game plans have advantages and disadvantages, according to Clare. For example, paying off your balance with the highest interest may take the longest, but will clear the biggest chunk of your debt first. 

Talk to your credit card provider  

Clare says having a frank, open conversation with your credit card provider about debt, your spending habits and your credit limit may seem “a bit like going to your doctor with an embarrassing problem”.

“You’re mortified, but they deal with worse all the time,” she says, advising to look at it as a “transactional conversation where you’re trying to get what you want”. Having a conversation with a professional is likely to help you deal with your feelings of anxiety around the subject, Clare says, because it will demystify the situation.

Also, being clear about where you’re at with your provider might cause them to help you out. “They might not be able to do anything, but they might be able to offer you a better interest rate or they might be able to offer a goodwill gesture of an interest freeze for a month or two,” Clare says. “That can give you a really good kickstart to paying things off.” 

Reframe the way you look at your budget 

Once you’ve got a handle on the state of your relationship with your credit card – in terms of balance, interest and your credit score – Clare advises reframing the way you look at your budget going forward.

“I frame my budget as a way of looking after myself now rather than a way of restricting myself,” she says. More than anything, it’s about taking the scare factor out of budgeting, and finding something that’s right for you.

Clare warns against the idea of “crash budgeting” where, like with crash dieting, you limit your spending so much that it feels like you are “punishing yourself”.

“If you cut everything out for the sake of paying off a credit card a month or two sooner, one of two things will happen,” she says. “Either you’ll manage to stick to it, but be miserable, or you’ll set yourself up to fail.”

She insists that it’s better to come up with a realistic timeline, as well as incorporating things you enjoy doing (and spending money on) into your budget. “Make sure that you’ve ring fence a couple of things that you enjoy, even while you’re paying off debt – this is really important,” she says. 

Thought techniques to try before making any impulsive credit card purchases 

“Credit cards separate the thrill of buying from the pain of paying that you don’t have to see the immediate effect on your actual current account balance,” Clare says. This pattern leads to you “disassociating” what you’re actually buying from how much it costs.

Clare recommends practicing a few thought techniques before impulse buying. “Before you spend money on your credit card, imagine someone gave you the money that you’re about to spend – your mum has given a birthday gift or something – and you have the cash in your hand. Is this what you would spend it on?”

If it’s not, she says, then it’s likely you’re only buying it because you can “disassociate” from the cost. Another thing Clare advises is to allocate yourself a certain amount of time before you click “purchase”, to mull over if this is something you really want, and if the cost is worth it.

Set a tangible goal to work towards 

Once you’ve done some work on your relationship with your credit card, Clare says it’s important to have some goals for where you’re going to spend your money when you’re headed out of the red. It helps to reinforce why you started this journey in the first place.

There are many milestones you could be heading towards: “Maybe you want to start saving an emergency fund, or maybe you want to try your hand at investing, or save towards buying a house, or maybe you want to stick it in your pension,” she says.

Clare stresses that not everyone will be heading towards a major life goal, and advises bearing short and long term goals in mind, to keep you inspired. “It doesn’t have to be anything super deep,” she says. “It can just be thinking about your next holiday.”

Above all, Clare recommends that you resolve to not let your relationship with money – and your credit cards – define how you view yourself. “We’re all more than the sum of our parts, money is just one of those parts,” she says.

Speak to a financial adviser registered with the Financial Conduct Authority before taking any financial advice, and think carefully before making any decision. 

  • Clare Seal, financial wellbeing influencer

    Clare Seal financial influencer

    Clare Seal is the creator of the @myfrugalyear Instagram account, founder of The Financial Wellbeing Forum and author of Real Life Money: An Honest Guide To Taking Control Of Your Finances and The Real Life Money Journal. She works to address the deeper causes of debt and financial difficulty, discussing how mindset, privilege and circumstances contribute to our financial lives and emotional wellbeing, giving guidance on how we can resolve money worries for good.