How to deal with credit-card debt

Feeling the pinch? There are cheaper options than a payment holiday if you owe money on your credit cards.

Almost 1.5 million payment holidays have been granted on credit cards and personal loans since the lockdown began. While a payment holiday can be a lifeline if your income has nose-dived, there are cheaper alternatives. The trouble with holidays on credit cards is that – just like mortgage holidays – they aren’t free. You may not be making any repayments, but the lender is still charging interest on your debt.

What you owe is growing, so your monthly repayments will have to rise when the holiday is over, or it will take you longer to clear your debt. If you take a three-month payment holiday on a £4,000 credit-card debt with a 21.9%APR, you’ll owe an extra £203 when the holiday ends. This highlights why “only those who really can’t afford to make payments... should [take] payment holidays on things like credit cards, which have higher interest rates than mortgages or unsecured personal loans”, says George Nixon in This is Money.

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Ruth Jackson-Kirby

Ruth Jackson-Kirby is a freelance personal finance journalist with 17 years’ experience, writing about everything from savings accounts and credit cards to pensions, property and pet insurance.

Ruth started her career at MoneyWeek after graduating with an MA from the University of St Andrews, and she continues to contribute regular articles to our personal finance section. After leaving MoneyWeek she went on to become deputy editor of Moneywise before becoming a freelance journalist.

Ruth writes regularly for national publications including The Sunday Times, The Times, The Mail on Sunday and Good Housekeeping, among many other titles both online and offline.