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?

My parents were generally quite sensible with money when I was growing up, and I got a set amount of pocket money per week for household chores and eventually did a Saturday job, so I felt I had a decent understanding of the value of money etc and didn't feel tempted by credit when I turned 18 like some of my friends who went a bit wild and started putting holidays and clothes on new credit cards.

But then I struggled at uni, despite my maintenance loan and a part time bar job I barely covered rent and bills. I was given a £1500 overdraft which I very strictly said I'd only dip into as a safety net. I only set it at £500 originally. But then more costs started adding up, I studied English literature and had to buy a lot of books - even second hand they added up. And then there would be a large gas bill in the shared house, or train tickets to come home etc. My parents helped out when they could but couldn't cover much. I started creeping more and more into the OD, and the bank suggested I extended it further. It was 0% interest as I was a student so it didn't seem too bad. By the end of my degree I had maxed out the full £1500.

I had a year to pay it back as a graduate before interest would be applied. I thought great, very manageable! But I graduated at the height of the late 00s recession and jobs were scarce. I managed to get a low paid admin one but was still paying rent in a shared house, bills, travel etc. I did start to pay off the OD but it was very slow as I didn't have much to spare. It felt like treading water, any unexpected expenses would set me back as I had to budget every penny.

Eventually the year ran up and I started getting charged interest. It took me a good few years after graduating to clear it all. Now I'm debt free, have a credit card I occasionally put purchases on but pay it off in full. My score is good and we're on track to buy our first property this year.

I think I initially had a vision of debt as big, outlandish purchases on credit cards but it can be small increments which add up and get worse. Small bits here and there make you think it will be easy to pay off, rather than looking at the big picture of it all combined. No major harm done for me luckily but I do agree we need more financial literacy in education.

@ColdBrightClearMorning completely agree. The people I know who have bored on about never having overdrafts have all had loaded parents.

Most people get into debt because outgoings are more than income, the biggest outgoing? Not an iPhone, or a holiday or even a car...but rent and bills.

Oh absolutely I’m surprised finances are not taught at school it’s insane
It has been covered in PSHE at every school I've worked in.

Interestingly, the students who showed the least financial awareness were those in more affluent areas where they were given almost any material good they wanted. One place I worked it was common to come home on your 17th birthday to find a new car on the drive.

I think it's disingenuous to say it's all about keeping up with the Jones's - this smacks to me of "Women are having fewer babies because they just want to focus on their career", it ignores structural inequality and generational issues passed down.

When we've got into debt it's never been designer clothes or holidays or must have Christmas gifts or whatever. OK there have been new cars. But leasing makes sense for us for the predictability reasons as others have explained. To be honest if you could lease an older car and have somebody else take care of the repairs/swap it if it broke down then I would absolutely do that, but it's not a service that exists. The fact is when we had older, cheaper cars we had bad experiences with breakdowns and we are not mechanical people. Computers we can fix, appliances we can make do, cars no. It's a safety issue among other things.

The fact is if you have never relied on credit you are probably not simply financially savvy, there is usually an element of luck in there as well. Whether that luck is having a stable home life so you could save up before you moved out or having access to a good education so that you got a good job or parents who helped out financially or even just parents who don't get old and poor and need supporting and drain you financially while you're trying to get a foothold on supporting yourself. I'm sure there are exceptions, but for a lot of people low income and poverty is how debt happens and it can become a vicious cycle.

@BertieBotts 100% and those who haven't lived it don't really understand the concept of not having any money. As in having to take your last £3 out of savings to buy tampons or having to pay a parents mortgage because their sick pay has run out and they're 3 months from retirement/pension. And I'm lucky my parents had mortgages, many would just get chucked out if renting. I am good at managing my money, but that's not the reason I'm not in debt.

I think it's disingenuous to say it's all about keeping up with the Jones's - this smacks to me of "Women are having fewer babies because they just want to focus on their career", it ignores structural inequality and generational issues passed down
It's not all about keeping up with the Joneses, but I think it is important to acknowledge that our shopping landscape on recent years has been about pushing a seemingly endless conveyor belt of stuff at people, complete with the endless pressure to 'buy it now before it's gone'. Add in that even on social media there's influencers pushing products and there's a trend of not being seen in the same outfit twice and it's easy to see how mindless shopping for stuff that isn't needed is also a factor.

My former colleagues didn't need to get a new Audi on PCP. By their own admission their existing car was perfectly fine, but they wanted the Audi because it was sportier. Same for clothing and beauty products.

Interestingly, the genuinely very affluent people I know tend to buy less stuff and don't tend to buy as often. I also think there's a generational difference between those who have grown up with fast fashion and 52 drops a year and those who grew up with summer and winter clothing seasons.

I agree. In my first pt job at a department store I was offered a “partners card” basically a massively high interest store card. I was 18 and would buy overpriced Morgan crop tops and Clinique, racking up far more than I earned. In fact I ended up not going backpacking due to this, so depressing.

In my 20’s I racked up credit card debt and only started reigning in the racking it up/paying it off a few years ago. I realised that I was over 20k in debt, almost half my salary.
I was lucky in that I have had help paying it off (wealthy/guilty ex) but I now have no debt and I am SO determined to stay that way. It consumed me and made me feel chaotic and immature. I hated it. I am drumming into my dc that if you want something you save for it. I really hope they have a healthy relationship with money.

Scarily easy to get into debt if you’re young and reckless, have mental health issues, or just never learned properly about managing your finances. A combination of all three saw me in terrible debt at one point. I owed £35k - more than my annual salary at the time - on three credit cards and only paid the minimum off for years while they kept increasing my credit limit. Also had about £15k debt across store cards.

Thankfully I was able to get a grip on my spending, stop using credit completely and start paying down my debts in a manageable way. But there were a few years when I was totally consumed by the stress of the situation I’d got myself into and unsurprisingly, the companies giving me credit didn’t give a shit.

I’m trying to teach my teenagers better than I was taught.

Never had debt, except for a mortgage. Always had a savings buffer. I understand many people don’t have a choice, especially at the moment, and living expenses have to go on Cc’s. But those who think overdrafts are free money, or uses cc to put stuff on like holidays, fancy shoes going out and designer clothes, you take full responsibility for your debt.

@BertieBotts agree.
When the old banger of a car you could afford breaks down, you borrow to replace or you can't get to work.
When you need to move out of the home you're renting, from no fault of your own and you need to cover the expenses involved in that.
When you make a mistake and you get a small cheque returned and get charged more than the amount of the cheque....
So many circumstances where a person can easily get into debt because of low income.

@Sidalee7

I agree. In my first pt job at a department store I was offered a “partners card” basically a massively high interest store card. I was 18 and would buy overpriced Morgan crop tops and Clinique, racking up far more than I earned. In fact I ended up not going backpacking due to this, so depressing.

In my 20’s I racked up credit card debt and only started reigning in the racking it up/paying it off a few years ago. I realised that I was over 20k in debt, almost half my salary.
I was lucky in that I have had help paying it off (wealthy/guilty ex) but I now have no debt and I am SO determined to stay that way. It consumed me and made me feel chaotic and immature. I hated it. I am drumming into my dc that if you want something you save for it. I really hope they have a healthy relationship with money.

JL?

I remember when my friend in the very early 00s worked for a designer brand, it was a condition of her accepting the job that she applied for their store card. It was a credit card, not a points card.

She got one, and never used it. I can't imagine that sort of thing happening now!

Havent had debt for 10 years + and am anal about how I spend money now, buypt yes, it is far too easy to get into debt and I certainly did so!
I have read and thought about all the reasons for doing so. I suspect keeping up with the Joneses is the closest for me ( hard though it is to accept). It never felt that way, but wanting the children to have what their friends did..... well. Actually, being totally honest, that was it. Wanting my children to have what their friends did.
I grew up piss poor, so never expected it. My children deserved more ( in my head).
I had debt. Horrible, life changing debt, not just because of credit being easy to get - my story is long and sordid.
But at the heart of it all was my children.

My kids are well grown up and gone. I do not owe anyone a penny. Literally.

It is soooooo very easy to get into debt - i paid a HUGE price for it - just dont. I can honestly say my debt problems ruined my life.
All okay now, but some things can never be forgotten, can they?

@drivenmadbyhomeschool yes it was JL!
So bad and you also had to buy your uniform (nasty navy trouser suit and court shoes) and it was deducted from your wages.

Agree, far too easy to get into debt and unless you get a sudden windfall of money, near impossible to get out of.

I grew up with parents who had to have holidays, new car and new clothes constantly. They have been bankrupt and lost their house because of this (now ok), but when you grow up with that throwaway attitude to money it's difficult to get out of that mindset.

DH is strict with our savings, but we've never had debt and only a car loan (no mortgage as still saving). But if I had t been introduced to being strict I would undoubtedly have gone the same way as my parents.

Advertising and influencers are hugely to blame too. Brand new phones etc aren't necessary.

Banks etc are rigged against low incomes. Overdraft charges make it impossible to escape and pay off. Low income means you can't afford expensive, long lasting shoes etc so always need replacing. You're forced to rent, which means you have no hope of making any savings.

It's easy to sneer at people who have credit cards etc when you have a comfortable income.

Credit cards - the only point in them is to create debt for people.

What is the point in them? It's so so so easy to get into debt on them and then watch the interest explode, interest on interest, credit limit easily increased, often without asking.

I think these should be heavily regulated.

The whole credit industry needs looking at.

Of course, easy credit does help our economy because people buy things (they don't need) but buying things helps keep people in employment.

Stellaris22
Surely that is a case for responsible lending though?

I agree with you that some items cost more up front to be more economical over time, but responsible lending would still allow for that. If someone needs to borrow some money to buy a decent set of work boots, then they could get credit for a reasonable amount.

Is it really responsible for fast fashion websites such as Boohoo (who sell bikinis for £3, having several 'drops' a month of cheap, trendy clothes that will fall apart and date within months) to be pushing deal upon deal, running countdown clocks for the deal to encourage people to rush to the checkout and the saying to consumers they can put it all on Klarna?

Klarna makes money off companies wanting to increase sales to customers who can't afford it. Something I read said that basket amounts go up when people can use Klarna. I think companies like that are also quick to charge for any late payments and quick to pass on the debt. In this situation those with the least disposable income are being milked like a cash cow in a way that borders on exploitative.

Responsible lending is better for everyone, other than those who seek to get rich off the back of people making minimal payments or missing payments. In my opinion it's perfectly valid to question the role of buy buy buy strategies and easily available credit in the creation of personal debt.

Of course, easy credit does help our economy because people buy things (they don't need) but buying things helps keep people in employment
Cross posted but I totally agree.
Frequently it's people being given access to money they don't have (and at times can't afford) to buy things they don't need, so that those at the top get rich from the purchase, and rich from the interest and fees.

I agree with you.

I wasn’t helped at all by starting uni and basically being offered £10k in interest free credit cards. It was too much for me, I spent it all.

It definitely is. I know of several people who are in debt and it’s so easy to do so. I got my first credit card at 19 and while I have always paid my credit card in full and probably paid £2 in interest since then despite my credit limit being £15,000 on my main credit card (I’ve been using credit cards for five years) - it is too easy to overspend.

I feel like a lot of it is to do with your surroundings. My parents were very anti-debt and instilled in me from a young age that credit cards can be your best friend if used properly which I follow to this day.

If I can ask - what made you change your mind about paying it in full? Was there an interest free period or something?

@LolaSmiles

Stellaris22 Surely that is a case for responsible lending though?

I agree with you that some items cost more up front to be more economical over time, but responsible lending would still allow for that. If someone needs to borrow some money to buy a decent set of work boots, then they could get credit for a reasonable amount.

Is it really responsible for fast fashion websites such as Boohoo (who sell bikinis for £3, having several 'drops' a month of cheap, trendy clothes that will fall apart and date within months) to be pushing deal upon deal, running countdown clocks for the deal to encourage people to rush to the checkout and the saying to consumers they can put it all on Klarna?

Klarna makes money off companies wanting to increase sales to customers who can't afford it. Something I read said that basket amounts go up when people can use Klarna. I think companies like that are also quick to charge for any late payments and quick to pass on the debt. In this situation those with the least disposable income are being milked like a cash cow in a way that borders on exploitative.

Responsible lending is better for everyone, other than those who seek to get rich off the back of people making minimal payments or missing payments. In my opinion it's perfectly valid to question the role of buy buy buy strategies and easily available credit in the creation of personal debt.

Interesting. I also read that people spend less when they pay with their debit card/cash versus credit card which I can believe.

despite my credit limit being £15,000 on my main credit card (I’ve been using credit cards for five years) - it is too easy to overspend

Especially if you hit a rough situation and need money to get by. I can't imagine how many people are relying on credit cards at the moment.

And it's debt that needs to be repaid whilst the interest at 25% builds up.

A bank wouldn't lend money to you if you lost your job - but credit card companies don't know your situation if it changes.

Of course, if people need money and can't get money even via credit card channels, then are the other loans that are advertised at 99% APR or illegal money lenders.

This is American - but probably reflected here as well

eu.usatoday.com/story/money/personalfinance/2021/01/27/credit-cards-debt-grows-millennials-during-covid-pandemic/4250479001/

About 56% of millennials say their credit card debt has grown since the start of the pandemic, compared with 53% of Generation Xers and 46% of baby boomers, according to a new survey from CreditCards.com. About 55% of millennials blamed the crisis for their snowballing balances, while fewer than half of Gen Xers and baby boomers pointed to the pandemic as the cause of their growing debt, according to the survey of 2,475 adults in mid-December.

The reason isn’t due to poor spending decisions but more likely stems from the pandemic’s greater financial impact on millennials compared with older generations, says Ted Rossman, CreditCards.com industry analyst. Millennials suffered a double-whammy: The generation trailed in wealth creation in the years before the pandemic, and roughly 6 in 10 say they or a household member lost income from mid-March through mid-December, according to census data.

There may be many ways people end up in serious debt, for real reasons, but since it has been asked the reasons given by the OP are just self indulgence and greed.

Interesting. I also read that people spend less when they pay with their debit card/cash versus credit card which I can believe.
I've heard that for cash vs card, but didn't realise debit cards were comparable to cash.

When I retrained my income dropped and I used the cash in envelope strategy for budgeting. It works on the principle that parting with physical cash tends to make people think more before handing it over, or in my case whether I wanted to break into a £10 for it.