To think getting into debt is incredibly easy?

[Username1917]

I had a comfortable upbringing, parents taught me “don’t buy what you can’t afford, saving is important” etc.

I got a job at 18 and a few months later was offered a credit card by my bank, for the first few months I paid it off in full religiously. Then I thought well I’ll just pay half this month and half next month, no big deal! Then it spiralled and I thought oh I’ll just switch to an interest free deal and pay it off before it ends. Then when the interest free deal expired I got a loan over 5 years because it was “much cheaper” per month.

Before I knew it I had debt (including PCP car) the same level as my salary, at the time that seemed very manageable.

I’m lucky that I have a well paid job now and have paid it off in full. It’s given me a right kick up the bum and now I have no debt, but AIBU to think this is not uncommon, even having grown up with parents that tried to teach me about money?

Because no money is made on people who pay their Bill's on time.
I do think that too many people are working with such a fine balance of every penny being accounted for that it's so easy just to borrow to buy a new fridge, washing machine etc.
I was shocked when I got my first credit card not only did it have a higher limit than what I earned but the amount of work friends and people I know saying "oh when are you going shopping now you've got all that money"
That shows where alot of their mindset is.
Tbh I blame the banks and lenders. Very few 18 year olds need thousands of pounds of credit. They could offer them alot lower amount to get them used to paying back what they owe etc.

@PracticingPerson personally I would never buy a car outright because of the value they loose! I’d rather have a car on finance and get a new one every 3years and it’s always under warranty! Seems pointless buying a car nowadays

Not getting into debt is also very easy. Probably easier.

When were young there were no credit cards

You must be some age, there have been credit cards in the UK since the mid 60's.

@BarbaraofSeville

A question for the people who say it's too easy to get into debt, would you be happy if it was harder to borrow money?

For example:

No overdrafts at all and all credit cards worked as charge cards in that the balance was paid off every month and if you couldn't do that, it was converted to a six month loan and stopped working for that time period, so you basically had to live on whatever income you had. Klarna and similar schemes banned. Forced cash based budgeting if you like.

All your bills are taken off your salary straight away, an amount put away for annual expenses and you have to make do on what you have left until the end of the month.

No such thing as a 'free' mobile phone on a contract. All phones have to be bought outright and you just have to buy what you can afford. Same for other 'non essential' household appliances (yes phone is essential, but a £1000+ iphone is not), also things like holidays and other discretionary spends like Christmas and takeaways.

Very restricted credit available very cheaply for household essentials like washing machines but you basically have to ask a bank manager in person for approval, who will go through your finances and spending to make sure you're being responsible with your money.

So no-one can get into debt and everyone has to live within their means, which are sufficient to cover essentials and some luxuries, but not everything that anyone could ever want, we're talking about the average majority, not those who genuinely don't have enough for the essentials or any luxuries, but not those who can have everything they want without compromise.

You could have a fancy phone or a holiday for example, but not both, if you wanted to go on holiday, you'd have to make do with a £150 smartphone not the latest £1k+ version.

So no-one would be able to get into crippling debt, so we'd all be happy with that?

That's how everyone I know who is sensible with money lives. I don't really understand the alternative.

Absolutely.

And the expectation is that people will avail themselves of credit.

I'm currently going through a divorce and I have worked out what sort of housing I can afford if I maintain a decent lifestyle. I probably can only afford a mortgage around 30% of what a bank would be willing to lend me.

My ex insists that I'm crazy to want to have such a small house payment in London - and my understanding is that a court would agree! It's bonkers.

I think the relentless onslaught of advertising and social media doesn't help. We are bombarded with images of perfect people living perfect lives with all the latest things and this becomes normalised in our minds. We look around at our own imperfect lives and tired old things and think 'well if everybody else has these things it must be the normal and sensible thing to buy them' when in fact it's a fiction.

On top of that I never failed to be amazed at the utter innumeracy of much of the population.

[quote Fiona2020]@PracticingPerson personally I would never buy a car outright because of the value they loose! I’d rather have a car on finance and get a new one every 3years and it’s always under warranty! Seems pointless buying a car nowadays[/quote]
While there are advantages of your method (it can be cheaper to run a small new car on 0% PCP than an older car if you're unlucky with repairs for example) your logic about not losing money makes no sense because the monthly payment is effectively you paying for the loss in value so it's costing you either way.

Have you worked out what the amount you pay per month adds up to over five years for example?

The idea with running a car that you own outright is that you don't always have payments going out and have some time that you're gaining money because you can save money as you aren't making any payments and aren't paying for any repairs. Over time, you should end up ahead as with a new lease or PCP, you have a car payment to make every month without fail.

[quote Fiona2020]@PracticingPerson personally I would never buy a car outright because of the value they loose! I’d rather have a car on finance and get a new one every 3years and it’s always under warranty! Seems pointless buying a car nowadays[/quote]
Surely you must realise you are still paying for the value they lose, just with interest on top. Not only that you are making sure that you are always paying for the very steepest part of the depreciation curve by always being in a new car.

If it's worth it for you then fair enough but don't kid yourself that you are saving money this way.

When I got accepted to law school (not this country and law school was 3 years and cripplingly expensive) the banks were throwing lines of credit at me. Tens of thousands of dollars. There was a warning expression that went something like "live like a lawyer as a student, live like a student as a lawyer". Most were expecting to come out of law school on six figures. This happened for some, but many didn't make it into "big law" and struggled for years to pay of the silly debt.

definitely - I've done it once or twice. Always paid it back and have credit card with small balance that I pay off every month or so.

I do have savings too.

yes absoluthy

I think most people who take a buy now/pay later/spread the payments offer intend to pay it off but then the next thing comes along and a minimum payment gets made.

This is exactly how I was, I always intended to pay it off the next month. Then it was in x instalments in six months. Then it was the loan I took out because it was “cheaper per month”.

I’ll be honest a lot of it was greed and buying things I couldn’t afford, but the availability of credit made this very very easy for me to do. It was always on the never never, oh I’ll pay it off when I’m older and earning more money. Like a PP I had an increasing salary so I banked on that being able to cover it, but in actual fact my tastes just got more expensive and the credit card balances seemed smaller in relation to my increasing salary.

That's how everyone I know who is sensible with money lives. I don't really understand the alternative
Living like that most of the time, but using credit for some purchases because it makes financial sense to.

It's possible to use various credit products to your advantage as a customer. We get cashback on one of our credit cards so we use it as a debit card and pay it off in full each month. We get paid to use a credit card.

I guess it's probably very easy. I've never got into debt for anything. I just go without. And I have gone without a lot in my life. The idea of getting into debt scares me. It just doesn't seem worth it in my eye.
I'll take the hard road over any sort of debt!

But you don't HAVE to take the credit card?!! I have never had a credit card...ever!! I have never had any debt. I have never needed a credit card...yes I know that in itself is privilege but imo one FORCES you to take a credit card.

And I'm not a boomer...I'm 35

It's not as easy as it used to be by far, but still it is easy I think. Although people need to have some personal responsibility no one makes you overspend.

I'm 36 now. When I was 18, so quite a long time ago now I took out credit cards and overdrafts to basically (and irresponsibly) supplement my spending. I'd grown up with very little money, single mum never being able to have anything that wasn't an essential. Credit cards meant that I could just buy a new top without worrying about it (I know that's wrong!). I clearly recall withdrawing cash on a store credit card (extortionately expensive!) to go on a night out. I am bloody ashamed of that.

When I had 3 credit cards and an overdraft bigger than my monthly salary I went to the bank to ask for help. Instead of actually helping me, they gave me a loan which I used to pay off the cards and OD. And then ran them up again over a few months. Went back, they gave me a second loan. This happened again and again until I was about 23, with maxed out credit cards, a huge overdraft (compared to my income) and FOUR loans. I was 15k in debt, on about a 12/14k salary. It only stopped when I was eventually refused for a fifth loan on the basis that my debt exceeded my salary. They sold me a shit ton of PPI too, clearly telling me I wouldn't be approved for the loan without it.

I take responsibility for my reckless spending. It was a stupid and ridiculous way to behave. No one made me spend it but it shouldn't have been possible for it to get to that excess.

Luckily I spoke to my Dad, told him everything. He gave me a massive bollocking for being so stupid and very generously agreed to take out a joint loan with me (they'd just stopped guarantor loans!) on the condition that he would sit with me whilst I closed all the accounts, I would open a basic bank account with another bank with no overdraft and that he would check my credit file every month. I was to pay every penny back. It was pretty humiliating but I was so lucky that he did that.

I did pay it, it took me three years and luckily it didn't affect my future access to sensible grown up credit because I never missed any payments (just took out loans to make them and did things like pay credit cards with credit cards which isn't allowed anymore). I got all the PPI refunded after I'd repaid it all and it was nearly 5k. I used that to open a savings pot that eventually turned into my house deposit. I also bought my Dad a swish meal out as a thank you (that I could afford by that point!)

The rules are different now luckily, it's much harder to get credit than it was 20 years ago. Still, I can see how it happens.

I'm now super sensible with money. Have decent savings, pension, only debt is our mortgage. I do have a credit card, my own and a joint one but we pay them off in full every months without fail. We only use them because we get cash back and never buy anything we can't afford. I am glad I learned my lesson young.

I have a credit card basically because before the pandemic I used to get an interest free season ticket loan from my employer. I had to buy the ticket myself and then they would reimburse me the full amount in my next pay packet and I would pay it back over the next 10 months. But I never had £5500 sitting around in my account to pay it upfront otherwise I wouldn’t have needed the loan, so I needed a credit card to bridge the time between buying the ticket and being reimbursed.

To those people saying 18 year olds dont need credit:

Starting a first job may mean having to find the money before the first pay comes in (which can take six weeks if you start just after a payroll cut off):

• clothes for new job
• season ticket for public transport
• food
• rent

Some young people are fortunate and have parents who can help them get through that first month but many dont.

@LolaSmiles

That's how everyone I know who is sensible with money lives. I don't really understand the alternative Living like that most of the time, but using credit for some purchases because it makes financial sense to.

It's possible to use various credit products to your advantage as a customer. We get cashback on one of our credit cards so we use it as a debit card and pay it off in full each month. We get paid to use a credit card.

That's exactly what I meant from the quote. I have several credit cards that I pay off every month (for building credits, for points and I have one that I use solely overseas because of it's exchange fees and it's easier to deal with that a debit card if someone targets me, as a tourist, for fraud). The only real debt I have is a mortgage that I can very comfortably afford (partly thanks to my credit history). Sensible is making credit work for you benefit, not avoiding it altogether.

Sensible is making credit work for you benefit, not avoiding it altogether.
100% argree with you.

My concern is that a lot of the irresponsible lending seems to be linked to increasing consumer spending on things general stuff such as more clothes, that actually the best thing for the customer is simply to buy less because they probably have an overflowing wardrobe from the last haul of online shopping/going to town. It's all about encouraging people to buy more shit, or have the most up to date shit rather than promoting the responsible use of credit.

I had some younger colleagues who said I was lucky to have bought a house in my 20s. They didn't seem to realise that having a new Audi on PCP, weekends away, ordering clothes on their lunch break, all the credit card jokes etc were the sorts of things that would be best cut back if they wanted to buy a house. From what they shared, there seemed to be a norm with their friends to have new stuff all the time.

@GnomeDePlume

To those people saying 18 year olds dont need credit:

Starting a first job may mean having to find the money before the first pay comes in (which can take six weeks if you start just after a payroll cut off):

• clothes for new job
• season ticket for public transport
• food
• rent

Some young people are fortunate and have parents who can help them get through that first month but many dont.

Thanks for this.

There seems to be this idea that all 18yr olds are still living with a loving family that can help them out financially. At 18 you’re an adult and many are already living on their own, it costs money to get and start new jobs. Money for rent and flat deposits. They’re often paid less than older workers, and ineligible for many benefits older people can get (such as working tax credits).

Not everyone lives the charmed life some on MN seem to assume is across the board.

Oh absolutely I’m surprised finances are not taught at school it’s insane . You see all these young people passing their tests and getting brand new cars . I was in my 40s before I got a new car always 2nd hand . In fact I think that’s part of the problem image and knowing you can get it easily .
I grew up with parents who never had much money , they both worked but smoked heavily and had debts so struggled . I vowed that I wouldn’t be like that and while we only earn moderate salary’s I really hate debt , I’ve a mortgage and home improvement loan but it scares me and will not put anything on credit card unless I can pay it back .
I can completely understand how someone can get into debt through no fault of their own as it spirals and possibly some shame and embarrassment to get it sorted .

I think there is an element of keeping up with the Joneses coupled with toxic factors such as easy access to credit. It's difficult to fight back against these things when you're an impressionable teenager exposed to social media, trends in school/uni etc.

I was at a red-brick uni and the vast majority of people on my very small course came from well to do backgrounds, had come from boarding schools etc. Their lifestyle was so different to mine, there was no comparison. And I really struggled to keep up with them socially because I just did not have the money to spend on nights out 5 nights a week, followed by a weekend away at a friend's parents second home. But if I had had easy access to credit back then (this was the noughties) maybe I would have got into debt trying to keep up with them, I don't know. There but for the grace of God.