What fools we’ve been - credit cards

[Janedoer]

Hi,

so went screwed up spectacularly! We’ve had two very expensive years of renovations to our house. In our stupidity we totally underestimated the costs. In even further stupidity we continue to overspend, using credit cards. We’ve played the 0% credit card shuffle game but it’s about to come crashing down. We fucked up and missed a loan payment and it impacted our credit files. We can now only get very high interest cards and no chance of a 0% balance transfer. This means that in February we’ll have £17k of credit card debt at 26%. This means that our current payment of 170 will be over £500. I’m sick to my stomach.

the good news is that despite the interest hike, we can afford the increase. It’s just a sickening waste of money. We were turned down for a remortgage and we’ve been advised to not apply again for at least 12 months. Probably not the best idea anyway.

were a couple of professionals with a 100k Joint salary. What utter fools we’ve been. I’m so ashamed.

Hi Op, you have had some great advice, I am a little old fashioned but when I was in a financial fix I found it helped me to use cash, much easier to see how much I was spending, and made me slow down and think, if that makes any sense. Good Luck.

OP surely you can feed 2 adults and 3 DC for less than £150 per week. Do you buy lunches at work? If so stop and take some lunch from home. Don't buy coffee at work take a flask. I'm sure if you set your mind to buying less meat and cooking more vegi meals and batch cooking with own brands you could shave off another £50 per week meaning you could pay down an extra £200 per month off this debt. It won't be forever but you really do need to focus on maximising your savings to pay off the debt. Every pound you can pay off will mean less interest you will have to pay. Do you have any subscriptions you can cancel, magazines, flowers, or similar? Can you cut out takeaways completely? Whatever you do don't spend a lot at Xmas. Ask your Mum for a loan and pay it off of the debt. Don't be tempted to use it for Xmas gifts. From now until February you can make a big indent into the debt. Get your DH on board. Can he cut back on spending money? Will he help you?

Excellent advise. You can do this OP. Be brutal.

I also thought at least you've kept your sense of humour, listing gin as a necessity! You have my sympathy, that absolutely horrible feeling when you realise you've made a major mistake.

I can understand that you may not want to ask her but a loan from your mum might be sensible. Also, could you improve one credit history? So that one of you could access a 0% card sooner? I've not been in your situation but, having lived through a time with a very low fixed income, we have never again lived off credit. You will come out of this stronger and wiser.

You mentioned your dad died. Sorry for your loss. Do you get an inheritance?

She's already tried and been refused.

I’m not surprised you feel so low. It must be terrifying. BUT you are ok, you can clear it and you’re in a great position compared to many. It’s a lesson at least, please don’t be tempted again, save at least 6 months of costs/salary and then save for big purchases on top.

Scrimp and save every penny - use all the tips from above. No treats or unplanned spend - make sure to save £100+ a month for emergencies to avoid needing to borrow again. You can easily pay £1k per month and take about two years to clear it. No holidays or big/regular treats, but the kids are young and they won’t remember as much as when they’re older, and you will be debt free then!

Stay calm and don’t beat yourself up.
and sorry about your dad it must be hard on you and your mum…
genuinely in 18m / 2 years this will be a distant memory.

we are high earners but had something similar ish happen 18m ago (10k of work turned into 65k!?!?)
IT WILL BE OKAY!!! 💐

if they are older id get the kids onboard with “being frugal” and just go for it. Have a heartfelt Christmas and do NOT go overboard through guilt.
No coffees, no takeaways, no sweet treats, no junk £2 toys for the kids … just don’t do it

Once the debt cleared you can wait a month or two then tell them and all have a nice family treat as a reward for tightening your belts.

At that my level of interest every single pound you can pay off before Feb is going make it less painful long term (As is every £ after)

genuinely do talk to your mum and take whatever she can give and repay her later in 2025.
You should be able to do at least 10k before Feb without breaking a sweat 2k x 4 plus £££ from your mum. That will make a big dent and remove of lot of wasted £ on interest.

at that level of interest I’d also look at selling unwanted items on vinted etc (it’s good to declutter anyway)

Lots of people (myself included) manage fine on less than £2k a month before all bills, so I'm sure you can work something out. £1k a month should be plenty to feed and clothe you all plus pay for fuel, surely? And then you could chuck £1k a month at clearing the debt.

You’re not the first and you won’t be the last so don’t beat yourself up OP. Financial literacy isn’t a skill everyone gets taught and it’s easy to get giddy when it’s all going good and not realise how precarious credit card debt can be.

As PPs have said, cut back to the bone and pay as much as you can off. I had just over £30k of personal debt in Jan 2022, mainly on credit cards plus a consolidation loan. I was made redundant and reduced it to £20k then chucked everything at it. By February next year I’ll have made my final payments, despite us putting a small amount on cards towards the end of our renovation last year.

Looking at the big number is scary but you just need to chip away. The aim isn’t to pay it all off immediately - you just need to get it down so the interest reduces.

It’s worth reading more about how to manage your money, MSE has great resources and there’s plenty of books/podcasts around. I had to shift my mindset to achieve the goals I set for overpayments but those changes are the ones that’ll also keep me debt free in the long run.

If you can afford the 500 payment why not start paying that now get the balance down as much as possible. Focus it all on one card to get that paid off and you might get another 0% transfer offer on that card

I'd reframe this as possible the best thing to ever happen to you.
You have a healthy income but need to learn to budget and prioritise, by being creative with money and saving like mad your whole attitude to finances will change.
I potentially see you five years down the line with no debt, healthy savings to cushion you and a financial structure to prepare for three lots of uni fees, annual holidays, house repairs etc.

I dont want to minimise but for the sake of your MH you really need to reframe this

17k is not a lot of debt in terms of borrowing to achieve renovation/new kitchen or whatever

Its a bummer that you're now on a high interest rate, but if you could get some money from mum, and then make a years worth of payments, your credit rating may well allow you then to borrow the rest on a more reasonable rate to pay off the rest or even borrow more on the mortgage if possible. This is a short term problem that can be sorted.

It is not the end of the world. You're asking for advice in the wrong place here anyway with everyone this site apparently perfect with money management and decisions and freely calling people stupid and dumb if they as so much as take a gamble on something and it doesnt work out. Particularly higher earners I find, much more judgement there

Are you sure, 17k's worth of blackberry jam, nettle soup, dandelion tea?

Try not to beat yourself up. You made a mistake - but nobody has died. It's just a silly financial cock-up and in the grand scheme of things it's really not important.

You are catastrophising and part of that is going through a cycle of self-loathing. But it's not helping anything and actually is just making you ill - so you need to take a deep breath and stop. You don't need to feel ashamed, stop punishing yourself. It was a mistake, you are human, it happens.

Remember the following:

• You and your family are still OK - your kids are healthy, fed, clothed and loved.
• You can afford the increase - yes it's bloody annoying to have to spend extra money on payments, but its unavoidable so that's that.
• Your credit record is a temporary record - the impact of a missed payment will not affect you long term. As PP have said, you may find that in 6-9 months time it will have less of an effect.
• Beating yourself up about making a mistake is achieving nothing. You were grieving the loss of your Dad, it's not surprising you were distracted at the time. But you are pouring your headspace and emotional energy into something which is pointless. Re-focus on moving forwards.

I second the recommendation to use the Money Saving Expert forums. They are incredibly good at budget advice.

Good luck.

She made a simple cash flow error and now cant access 0% cards or bog standard loans. It will clear over time, this is a short term issue.

Then she started making enquiries or applications all over the shop so flagged up probably that she was trying to borrow more money.

She can borrow on higher cards which is what she now has. Its not unusual.

I virtually live in my overdraft but get credit easily (phone/klarna/paypal/dfs) but they dont like missed payments.

I cleared a lot of my debt by getting a second job.
Also, agree you must cancel Christmas this year for everyone except the children. No cards no presents for anyone else, announce it now so everyone is aware.
You can always say you are doing it for environmental reasons!

Given the OP can afford the higher payments Im not sure there is the need for the hairshirt lifestyle changes. Second job, lodger, cancelling Christmas, scant provisions and only from Aldi

Live your life, reasonably, OP, it will be sorted by a year or so.

The missed payment will drop off your file relatively quickly so give it six months then do a soft search to see if you’re eligible for any 0% cards or bank loans then. In the meantime cut back on literally everything and throw every penny you can at it. I’d want to pay way more than £500 a month on your salary. And set up a standing order to transfer the money to the bill account each month and DD for the minimum amount to all credit cards so you never miss another payment.

With determination you can have this sorted in 18 months tops.

I agree, it's not the end of the world. You just need to do some minor lifestyle adjustments to accommodate for the extra payments.
What is in your favour is that you can pay it off if you wanted to, many aren't in that position.
No money, savings etc is truly yours if you have debt, so just get it cleared!

I don't understand why you need new clothes monthly for kids. Just use your money for fuel and food. Nothing more. Then it'll go down very quickly.

Do you need 2 cars?

Ah well, it'll no doubt become the best financial lesson of your lives. Try to make a plan for repayment, and a plan beyond that for saving. Stick to it rigidly until you have, say 10K in savings.
You'll feel amazing when the debt is repaid and even more amazing when you have savings.
Ultimately it's only wasted money. You haven't hurt anyone, and you can make it good.

If it's any consolation, I blew $100K gambling and I got through that.

See, you are dismissing all the small measures. But it will add up and make a massive difference.

You say you can actually afford the new repayment, so start overpaying or saving that money (and more ) NOW. At £500 a month you can take £2k off that before the high interest kicks in.

Sell a load of stuff on Vinted, EBay, Marketplace, Ziffit… £500 is one month down on expensive interest.

Get a side job. Freelance bookkeeping / accountancy for small businesses if that is your skill, or similar. £5k earned between you will make a massive difference.

Take a weekday lodger?

Debt builds up bit by bit, you can get it down bit by bit.

Your attitude is a valuable asset!

Throw everything at the card with the highest interest , or if they are all the same the lowest balance , get on vinted or marketplace and sell anything you don't want . I would look for inspiration on debt free diaries on the Martin Lewis site .