What to do if you’re always close to your credit card or overdraft limit

close to your credit limit

If you’re using more than half of your limits on credit cards or overdrafts, some lenders may refuse your loan applications. Lenders could see this as a red flag because it’s one of their so-called ‘debt ratios’.

This can be hard but you’re going to need to pay down your credit card balances. Here are five tips to help you along the way.

  1. Leave your card at home if you go shopping. Better still lock it away or cut it up. You can always order another one when you feel you’re back in control.
  2. Free up cash in your budget so you can pay down more debt. Check out our tips on using the 50/30/20 budgeting rule to free up money.
  3. See if there’s any unclaimed tax credits or other welfare benefits you can claim. Use this extra cash to pay down your cards.
  4. Pay off more than the minimum balances on all cards whenever possible
  5. Focus on clearing the most expensive card first. Additionally, try and get all balances below 50% of their limits.

Despite the above, it is worth remembering that there are good reasons to carry a credit card.

They can offer protection for certain purchases.

When used in moderation – contribute to your credit score.

Is there a better way?

You could end up wasting time and money paying down cards over many years. On this basis it is might be worth considering a consolidation loan or exploring a debt remedy (also known as becoming insolvent).

About Adrian Davies

With a background in money advice, Adrian's been campaigning for fairer finance for 25 years.

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