No wonder there's a debt crisis

[undebted]

Just read this in the guardian, made me reflect a bit. When I turned 18 I got approved for a Barclaycard with a £2.5k limit, felt like I'd hit the jackpot. It spiralled pretty quick from there as it was a perfect combination of being clueless about finances, how interest rates actually worked and long term impacts/credit scores (perhaps school could of taught me that instead of pythagorus theorem, of which I remember the name and nout else!) and a lifestyle that involved wanting to go out drinking a lot, keep up with mates and have the latest clothes and tech, a nice car. By the time I was 22 I had 2 maxxed out credit cards (6k total) and a loan of £6k I was missing payments on. I ended up royally screwed and learnt my lesson the hard way with destroyed credit rating and a 5 year debt management plan. It was of course entirely my fault, but the fact that £12k credit was available to a very young adult with a part time minimum wage job was crazy to me.

It's been a couple of years since my plan ended and all my debt was repaid in full. My credit score is improving but still not great. I got an Aqua card a year ago to use everyday then pay off in full every payday which I do, I've accepted every increase as it is supposed to help my score but I never put more on it then I can pay off the very next payday as the interest rate is 49.9% APR. They've given me £3750 now on that card with that interest rate. The rate is insanity so I've recently applied for a different credit card and been given an automatic £5k limit on one of them. My clearscore shows that I'm fully 100% pre approved for loans of up to £7k. With a credit score full of defaults!

It's just no wonder is it. If you're hard up, which unfortunately so many people are and are going to continue to be in this economy, it's only going to get worse. People need money, and are offered so much at the click of a button. How is this right?

Guardian article

amp.theguardian.com/money/2022/mar/22/uk-households-debts-energy-prices-benefits

It's scary. I've known a couple of lone parents (like me) who were very blasé about £3/4k of credit card debts. I don't understand how the banks let them do it.
I work PT and have been ruthless about credit card for emergencies and big purchases only. Never let myself have more than £1k limit.

Yes I'm terrified of debt now, I'm too scared to actually use a credit card properly and just use it in lieu of a debit card so that I can pay it off in full and try and recover from the DMP. Same with accepting increases to keep my allocation rate low but still only spending the same amount. The second I got my new card I closed my Aqua one, but they didn't know I would do that, and we're happy for me to have 2 big limits to deal with and one crazy interest rate. Same for loans, no intention of getting one, but seeing what clearscore have me 100% approved for concerns me as the interest rates are so high and it's so easy to see how so many people fall into these traps and spiral out of their depth.

Well done to you OP. Failure of education going back decades. It's almost as if TPTB wanted you in that state.

It is ridiculous how little we are taught (or were taught, maybe it's better now) about how to manage money and finances- actual life skills. Things like how to vote and how local politics work, how to manage a bank account, understanding credit and being wary of it, how a mortgage works, how to save and how to make yourself able to get a mortgage- these are all things we should be taught about in school so we leave actually knowing how to look after ourselves financially.
Very well done in getting out from under it all. I was there a few years ago and I've just signed for my first house. It will get improve month on month. If you're with Experian you can get a free boost which can up your score a bit too.

Typo- it will improve not get improve!

I had a similar experience. Offered a £10k graduate loan by my bank as I was leaving uni, didn’t even have a job secured yet. All kinds of extra fees and charges added,
the old ppi etc.

Got a graduate job in London which was relatively low pay. Had no idea how debt, lending, credit scores, interest etc worked. Away from home, reeling from bereavement (my dad died), wanting to keep up with the others in my workplace/ new social circle. Struggled to keep up with payments, constantly being offered to refinance etc, just kept going along with it till I was in a right mess.

Ended up with an IVA.

Completely my responsibility and I accept
that. Have cleared all debts now, and married someone who is the most sensible person when it comes to money you could imagine so even if I was ever tempted by credit again, I have him to keep me on the straight and narrow.

It’s terrifying how easy it is.

I do agree financial education should be a key subject in schools. However, parents have a responsibility too.

like you I had a credit card at 18, but I also had savings and had been taught to save up to buy large purchases. I used the credit card or 0% interest where available but only once I had the money saved. I have always paid off my credit card in full each month. I always overpaid my mortgage, even if just £10 a month and had a standing order to put money in my savings each month.

I was extremely lucky to have parents who brought me up to save, spent time talking about financial matters, even now 40 years later we still talk about savings etc. This is why I despair about the lack of education and how some people live a life they can’t really afford because they want designer handbags, status symbol cars etc.
Note: I appreciate it is different if you are on the breadline and suddenly need a new boiler etc.

Sorry but no. It's not the credit card companies or the banks fault. People are spending money they don't have. Yes some don't understand interest rates, but every one knows that you have to pay the money back. Unfortunately, people are no longer prepared to wait to save for things. They want them now. Because they "deserve" it.

If you walked in to the bank with a gun and took £5k you're a crook. You take a credit card and blow £5k your a victim?

At the end of the day, banks are businesses and want to make as much money out of you as possible - and debt makes them money. Someone who regularly pays off their credit cards, never need an overdraft and never defaults on a bill might have a good credit score, but they're not going to earn the bank much.

So, in some ways it is irresponsible for banks to offer huge amounts of credit, but they're a business like any other and just want to make money off you.

I wish better credit/money management was taught in schools as you can't learn from parents who don't know how to do it themselves.

I've mentioned it before on here but i agree that financial planning would be a lot more useful than Pythagoras. What the fuck is that anyway? Anyway i got my arse handed to me by people here because parents should teach children that and that's not what schools are for. But that involves every child having parents who are financially savvy themselves. Very very few children do.

I've seen that argument before and I completely agree with you. It's just not realistic, so many parents are in debt themselves, not to forget that not every child is blessed with loving parents that would take the time to teach them this stuff. My parents were declared bankrupt twice in my younger years and were too busy trying to keep a family of six kids fed to make it a lesson for us.

Shouldn’t this sort of thing be what your parents or family members teach you.

Although I do agree there should be some lessons on general living life and all it entails.

I have always been very open about money with dc even from a young age.
Although I do remember at about 16 years old Dd looking flats to rent and thinking that you could get one for £50 per month and being shocked it was nearer £400 and that was not a whole flat but just a bedroom and you shared with other people and t then there were bills on top.

Debt can be very useful but for those who need it the most it's often very expensive & a slippery slope.

The issue is wage stagnation, low growth & more money tied up in housing. I'm not sure how things will improve.

I know my DS21 is in some sort of debt, (small overdraft) but I am/was a credit manager by profession and from the time he was nine or ten, he would pause the TV and call me and say have you seen the APR on this, they are having a laugh.

I ask him at random times which of his mates he owes money to and always try to make sure that he pays them back and owes me instead.

He has a good head on his shoulders, as he told me if he can manage his small overdraft for a year or so, then he will have a decent credit rating, his friend who is just as bright as DS but clearly not as savvy, looked at him and said Maaaaaaaaaaaaate come on, you are only 21. He replied, but I won't always be...

So despite the fact that he is spending a lot at the moment, I think he has his head screwed on.

My work here is done.

I wasn’t like this but my parents taught me to some degree money management as did DH Father who was an accountant.

Some parents are so awful they don’t deserve children when you hear of terrible abuse. But I just can’t get my head round how many don’t think to teach children basic skills. We used to get students turn up on campus who couldn’t even cook a basic meal let alone manage a credit card.

This is terrifying. My dh got into 43k worth of credit card debit. He was still being offered cards! I was hoping that no one would ever give him a credit card again but it sounds like they would?

43k of unsecured debt on a 30k wage with four kids!

I actually was taught about credit and debt in school. I'm early 30s. I teach it now as well.

Age 11 my eldest got a debit card and put all her saved birthday money into the account. She proceeded to spend it in her first term of secondary school on sugary drinks at Costa for herself and her friends and sweets. That is when she learned to save and be more frugal. Now her birthday money lasts the whole year and she makes herself snacks and occasionally goes out for a lunch or dinner or cinema. We have explained to her to never go into debt, except in an emergency for essentials.

I similarly learnt to budget even younger with pocket money due to my economist and frugal father.
I agree that it is hard for children whose parents haven’t taught them and I think some financial management should be taught in schools. However, I am pretty sure my kids were taken on school trips to Metro bank to learn the basics, pre Covid.
I am not sure schools can be responsible for everything though and parents have certain duties too.

However, parents have a responsibility too.

And if the parents are t financially astute?

Kids wouldn't listen if it were taught in school anyway. They're always banging on about how schools should teach them anything but the actual curriculum. Ok then, you say, let me tell you how x works. Then they either switch off, or argue with you because they've seen it differently on TikTok.

I remember being taught about how interest works in a maths class, 30 years ago. But there are probably people who sat in the same class as me who would swear blind they were never taught it.

It's very easy for someone in desperate need to see the lines of credit they are approved for and think I'll find a way to manage when they realistically can't. Its not always a choice and some people are in need. I never called myself a victim, of course spending frivolously was an awful idea and of course I was aware of needed paying back but I just wasn't aware at that point in my life how quickly interest rates, minimum payments, missed/late payments, credit scores etc would effect things. I paid every penny back and avoided insolvency due to guilt for doing it in the first place, and I can continue to take responsibility for that whilst also saying £12k in credit to an 18/19 year old earning no more than £400 a month was insanity.

I know an accountant who was in thousands of debt so it's not just education.

Shouldn’t this sort of thing be what your parents or family members teach you.

Ideally, yes, but it's obvious that millions of adults have absolutely no clue about debt or money management. There are daily threads on here about finances that prove that, lol.

Yep. I did similar. Although employed, put family holidays on cards I never paid off. Endless feckin cycle. Took me til my forties to ditch the cards, pay it all off and start saving. I was lucky I could do that.