Debt Management

There are basically two ways of managing debts, including credit card debts. One is tackling this alone, direct with creditors, whilst the other involves using the support and expertise of a debt management service. However, whichever route feels the most appropriate, there are two fundamentals needed to facilitate success:

  1. Stop spending now! Debt cannot be effectively managed if it continues to be built up.
  2. Complete honesty! Denial helps no-one and being unrealistic about the level of debt or ability to address it can make any attempts to improve the situation even worse.

The DIY Approach

  1. Gather up all statements from creditors. Identify the total balance owed to each, the interest being charged and the minimum payment required. Calculate how long it will take to pay off at this minimum repayment rate and look into making a balance transfer of all cards onto a card with a 0% balance transfer offer.
  2. Take a look at any bank statements: * Create a monthly budget of spending as it is now (without the credit card repayments).
    * Then, look at it again and identify where costs can be cut by eliminating any luxuries or unnecessary spending (remembering that it doesn’t have to be forever, just until those debt-free days arrive)!
    * Now look at necessary spending and see if this can be reduced. For example, can food bills be cut by eliminating waste or through bulk-shopping and batch cooking; comparing costs from a range of utility providers can significantly reduce spending on gas and electricity.
    * Create a new monthly budget incorporating the reduced spending in key areas and stick with it
  3. Now identify any money ‘left’ from your new budget, as this should be spent on repaying credit cards. If debt’ been consolidated with one 0% interest card, calculate the days until the debt is gone, as this can help motivate sticking with that budget!
  4. If a poor credit rating means being unable to consolidate with cards or a loan, check what is owed and to whom and prioritise paying off those with the higher interest first.
  5. At this stage, it’s vital to be communicating with creditors to identify how they can assist with debt management. They may agree to not add further interest, which allows the balance to reduce more quickly and in some cases may waive some of the interest already accrued.

Using a Debt Management Service

  • These companies offer their services in mediating between creditors and debtors and may be able to negotiate a reduction or ‘freezing’ of the interest on a debt as well as securing a lower rate of repayment.
  • Although the thought of having someone else deal with these issues can be appealing, do be aware to only use a service which is charitably or government based and does not demand a fee for its services: sadly there are companies out there who do take advantage of the vulnerable.


Finally, whatever route you take to manage debt, be aware that sometimes the debt management plans agreed with creditors do mean keeping the debt over a longer period of time because the repayments are significantly reduced. So, be realistic about what a debt management plan will be able to achieve and be prepared to work at it!