Credit card trap

trigg_27

trigg_27

trigg_27

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9 Jan 2018
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857
Location
Newport
I've got a credit card which I took out many years ago, which charges an APR of 34.9%

Due to the size of the balance and the amount I can afford to repay, the vast majority of my monthly payments end up going on interest, with the capital balance barely going down.

It feels like I'm stuck being a cash cow for the bank, being milked of £1500 a year in interest charges for the rest of eternity

What I'd love to do is get a new card and do a 0% balance transfer so my monthly payments actually start bringing the debt down, but my credit score is pretty low due to the high percentage of short term debt to credit limit.

Does anyone here have any bright ideas on how I can break this cycle (short of going back in time and not taking the card out in the first place or investing in BTC?) I've already decided I'll have to put my new build PC on hold for the forseeable since putting that £500 on the card will at least reduce the interest by about £170 a year
 
im sure you could get a 0% interest card, you could try something like the https://www.noddle.co.uk card matcher. Never used it so no idea how good it is.

even if they only give you half the limit you are currently you can transfer that, then try and find someone in a few months for the other half.
 
I was in a similar position when I graduated uni years ago, I went to my bank and got a loan at 6% or something (told them it was for kitting out a new flat not clearing debt) - sorted the problem immediately and cost me much less over the 5 years it took to pay the loan back
 
Another idea is to look for a low interest card for the life of the balance, even if it's only for part of the full balance it will save you a pile.
 
I made a similar mistake, lured in by the availability of interest free credit. Stupidly ran up a large amount of unsecured debt and then when the 0% ran out I couldn't get any further credit to balance transfer it across. Think I spunked around £5k up the wall in interest before I was able to drag myself out of trouble.
 
I would have thought a loan would be rejected because of the same credit score problems as the 0% balance transfer option.

I've done an eligibility 'soft search' and that estimates only a 10% chance of acceptance from a couple of the big companies, and no chance at all from a lot of others. The ones that have a decent acceptance percentage only have a short interest free period and would then switch to an even higher APR which would just make things worse in the long term.

On the plus side, my credit score climbed a whole 2 points in the last month...
 
Have you actually checked your credit score?

Just look on moneysavingexpert and apply for a half decent one and get a money transfer at0% or the lowest you can get.

Alternatively talk to your bank directly, they may be able to get out a loan paying less interest
 
Go on the mse website and run the application which only does a soft search and gives results on the likelihood of being accepted, then get one with the longest interest free period you can get. Divide your transfer amount between the number of months interest free and set up a dd for that amount.

Don't rack up more credit card debt while you're paying it off! (a mistake I'm still paying for)
 
bainbridge said:
Go on the mse website and run the application which only does a soft search and gives results on the likelihood of being accepted, then get one with the longest interest free period you can get. Divide your transfer amount between the number of months interest free and set up a dd for that amount.

Don't rack up more credit card debt while you're paying it off! (a mistake I'm still paying for)
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I've tried the MSE website - that's where I got the percentages in my earlier post. The longest interest free period I could get was 6 months and that would only be for a maximum of 1/3 my total balance, during which time I would still need to be making high payments on my current card and try to repay the transferred amount before the 0% period ends.

I've also just tried speaking to my current card provider, and despite having this account with them for 10 years or so, they won't even consider reducing the APR or switching me across to a new product with a lower rate
 
Have a chat in branch with your bank and I'd defo try for a consolidation loan in your scenario. Best of luck as I can imagine it being a horrid situation to be in!
 
also do whatever you can to lower your bills so you can pay more off, cancel subscriptions, if you rent look at a cheaper place etc.
 
Sounds like it' a th poipoint of in person, in branch, any of the support bodies.

10pc on mse tool basically means don't apply.
 
trigg_27 said:
I've got a credit card which I took out many years ago, which charges an APR of 34.9%

Due to the size of the balance and the amount I can afford to repay, the vast majority of my monthly payments end up going on interest, with the capital balance barely going down.

It feels like I'm stuck being a cash cow for the bank, being milked of £1500 a year in interest charges for the rest of eternity

What I'd love to do is get a new card and do a 0% balance transfer so my monthly payments actually start bringing the debt down, but my credit score is pretty low due to the high percentage of short term debt to credit limit.

Does anyone here have any bright ideas on how I can break this cycle (short of going back in time and not taking the card out in the first place or investing in BTC?) I've already decided I'll have to put my new build PC on hold for the forseeable since putting that £500 on the card will at least reduce the interest by about £170 a year
Click to expand...

Have you got any defaults/late payments on your credit file? Or are all your accounts ok? The score is less important than this.

Really your bank may be best placed to help. Even a consolidation loan at 12-15% assuming you have a poor history not just poor score should be achievable via your current bank. You may even get sub 10% of you have good standing internally with them but a poor credit file.

If you have a low credit score simply due to debt but your file is good then expect decent rates. Bank may need to see proof of payment of debt or if you go in branch they go through it all with you. Depending on bank, some have the underwriters in branch for low value loans which makes it easier.

Worth checking Noddle, Experian and Checkmyfile etc. Not all lenders relating to your acount show on each one so start with Noddle then work through the others if something seems off.

Also, lots of people in this situation so nothing unusual. Main hurdle is to deal with it head on which you are now doing.
 
It may also be worth a conversation with your card company to see if they're willing to come to an accomodation - I've heard of, though have not experienced myself, people being able to negotiate to a lower APR in the short term.
 
trigg_27 said:
On the plus side, my credit score climbed a whole 2 points in the last month...
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It didn't. No one "has" a "credit score". These arbitrary numbers which the credit reference agencies throw at you mean nothing to anyone. They are merely a representation of their own interpretation of your credit history. Lenders don't see them. Lenders don't use them. Credit "scoring" is done by lenders using their own internal system which simply look at your credit record, taking into account a number of different factors which they feel to be important based on their risk models.
 
Have a look at some of the lenders which do a "soft" search before you apply properly. It's not guaranteed, but will give you a decent indication of whether they will lend to you and at what rate, I believe Nationwide, Zopa and Ratesetter all offer this, and obviously there will be others
 
I feel as if I'm walking into the lions den here, try to go easy on me, but I'm struggling a bit with this.
All my life I've been a blue collar worker, always with a reasonable job, but never pulling down bundles, although I didn't do bad when I drove my own Black Cab, and I've never denied myself, nor my family, anything, if we needed it, I bought it, and at the end of the month, I paid my bill in full.
I've always had credit and debit cards, starting off back in the 70s or 80s with an ACCESS card, graduating through AMEX, DINERS CLUB, never had a BARCLAY Card, and right now I have a Halifax Clarity credit card, and a Halifax debit card, and both a credit and a debit card with Santander.
What I'm having difficulty with, is the fact that in around 50 years of having and using credit cards, I've NEVER paid one thin dime in interest, and I've never gone short of anything, how did the OP get into that kind of debt, did he buy a diamond ring every month, or fly first class everywhere he went, with a fly now, pay later outlook?
No doubt there's something glaringly obvious, and I'm not seeing it, as I say, take it easy with me.
 
Really sorry to hear of your debt woes, it’s an awful system and I imagine has the potential to make people miserable.

My advice would only be what’s already been suggested.

  • Use credit score company like noddle to find a card
  • Google 0% internet cards specifically suited to people with debt
  • Debt consolidation loan
  • Bank loan
  • If you have a mortgage you could consolidate your debt into it. Rates have been excellent.
We got a bank loan to purchase our conservatory, thankfully we paid it off way before the term, but the interest was low and could be perfect for you. As someone else stated it may improve your chances of the loan is, at least initially, for something else. But this maybe fraud so I’d be careful with this option.
 
Jean-F said:
I feel as if I'm walking into the lions den here, try to go easy on me, but I'm struggling a bit with this.
All my life I've been a blue collar worker, always with a reasonable job, but never pulling down bundles, although I didn't do bad when I drove my own Black Cab, and I've never denied myself, nor my family, anything, if we needed it, I bought it, and at the end of the month, I paid my bill in full.
I've always had credit and debit cards, starting off back in the 70s or 80s with an ACCESS card, graduating through AMEX, DINERS CLUB, never had a BARCLAY Card, and right now I have a Halifax Clarity credit card, and a Halifax debit card, and both a credit and a debit card with Santander.
What I'm having difficulty with, is the fact that in around 50 years of having and using credit cards, I've NEVER paid one thin dime in interest, and I've never gone short of anything, how did the OP get into that kind of debt, did he buy a diamond ring every month, or fly first class everywhere he went, with a fly now, pay later outlook?
No doubt there's something glaringly obvious, and I'm not seeing it, as I say, take it easy with me.
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You paid the bill in full each month. The OP didn't. You probably had more money than the OP and you almost certainly had a much lower cost of living, but it's the interest that does the damage.

Imagine a scenario in which someone accepts £1000 in credit that they can barely afford on a rather generous appraisal of how much spare money they have. Then their car fails and they have to spend £500 to get it working again because they need the car to get to work. So now they're overdrawn and the bank fines them and they can't afford to pay their living costs so they're overdrawn again the next month and the bank fines them again and again and now they're even further short of their living costs so they have to borrow more money and now they can't afford to service their debt and they're screwed.

I slid into debt like that, a bit at a time. Then you get debt to cover the debt and you're shuffling debt about and the interest payments and bank fines ensure that you can't afford to reduce the debt. The point is to keep you on the edge of ruin in order to maximise the profit made off of you.

It might be harder to get into that trap now, but it was very easy in the past.

I was lucky enough to have the option of working 60+ hours a week for 5 years to increase my income by enough to slowly reduce the debt rather than just paying the interest. I was also lucky that one of the financial companies I was in debt to was willing to waive interest charges entirely for 2 years.
 
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