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?

I don't think saying it should be taught in schools - not just in a maths ways - is blaming the schools. Teachers should be provided with the help they need to teach this well so there would be no expectation that they are of the money savvy variety themselves.

Why do banks do it?

Because its how they make money! I've had credit cards since I left uni, have never fully paid them off for various reasons so am totally on the hook paying every month. People like me are a great money maker for the banks! They're always offering me more cards/loans etc as I've never missed a payment. The banks love a customer who has debts that's they end up paying way over the original amount for.

They'd be out of business if it were only young people they attracted.

Just the other day there was a thread on here asking about Klarna. Turned out the purchase wasn't necessary at all, nor did the poster have the money for it.

I'm young - early 20s. Maybe I've just stumbled across a very responsible group of friends, but nobody in my circle would use Klarna or any type of instalment plan / max their credit cards. We're all way too aware of how important good credit rating and history is. I work in an industry where we regularly need to buy very expensive equipment (I'm talking tens of thousands here). Most of us have pre-approved loans at the bank (God knows how, I don't have the income to warrant that). However, most of us saw our parents buy those pieces of equipment for us when we were younger, on credit cards or bank loans. Some are still repaying. A lot of it wasn't even essential. So now, we save (for years usually) until we can afford to buy it cash.

I do see a tendency amongst young people to avoid debt nowadays. Especially those who aspire at getting on the property ladder soon. They have limited credit cards that are used responsibly - aka paid at the end of the month - for food shopping or other small amounts, to build a good credit rating and that's about it. But like I said, my experience could be an outlier and I just socialise with unusually responsible young people

Also don’t think this is something schools need to teach. Money management is personal and subjective and changes all the time anyway. People are comfortable with different savings/ spending/ debt/ investments.

Similar story here although I only racked up about 2k on a student overdraft. Still too much for me and my credit score was terrible. I used an Aqua card to build my score and thankfully, it's very good now.

I used to work for a family business and their attitude to credit was shocking. They appeared well off but everything was on credit cards or finance - cars, Rolex, Cartier bracelets, Balenciaga and Prada shoes. I would honestly rather have my 7 year old car and Converse and know I'm not in thousands of pounds worth of debt just to look flashy.

About 20 years ago I managed to get myself into £12k of debt: I only earned £15k. I went into the bank for another loan which I was eligible for but the bank manager gave me a huge bollocking for the amount of debt I was in and told me that it would get worse if I didn’t deal with it. He probably lost out on commission but it was the kick in the arse I needed. I took on an evening and weekend job for 2 years and paid it all off.

Now I’m so reluctant to get into debt, but I know lots of my friends have a lot of debt that they are quite blasé about: I think it mounts up when people are paying about £1k in childcare each month

Not smug, just how it is.
My cooker is currently broken, I have one hob and oven working.
It took six months to put aside the money for a new one as it would have been more expensive to fix it.
Was planning to replace it this month but unfortunately one of our external doors has broken, been deemed unrepairable due to age and has to be replaced.
We were able to order a new door immediately as it is more of a priority, the cooker can wait.
Had I already ordered the cooker on credit I wouldn't have been able to get the door. At least not without more credit.

The only things I would use credit for is mortgage and education. I like being able to sleep at night knowing I'm not being chased for money

Compound interest is on the GCSE maths curriculum. Percentages are primary level maths. So the fundamentals of what you need to know IS taught.

I completely disagree. Blaming the banks and taking no personal responsibility. If you maxed out £6k on cards, on fancy clothes, then that was your choice, very irresponsible, but then in time you learnt that you need to pay it back. I've never maxed out a credit card, had one at 18 and paid it off every month, still have 2 or 3 now, monthly paid off.

'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.'

Read the OP.

@littledrummergirl but you do HAVE a working hob and oven. So you could wait for a replacement. A pp above said about people buying new, luxury things like iphones and big tvs and I would agree that getting into debt for that is not right (though I might disagree on a holiday if it was once every few years and something you could manage the regular payments well enough). However if you do not have savings, which is increasingly likely at this point with wages and CoL as they are and something essential breaks and you need a large purchase, you have to do it. Ideally, you want a system where people are not locked out of sensible lenders and forced to go to payday loan type companies but as with many things, those most in need of sensible lending often can't access it.

Completely agree with you. People need to take personal responsibility. I don't see people blaming pubs for serving alcohol

Read the OP, gent. She does take personal responsibility.

does anyone read the bloody OP anymore?

Equally there are a lot of people who are terrified of ‘debt’. People who didn’t go to university because their parents scared them silly with all of ‘debt’ and acting like the tuition loan fee was akin to having a £40k wonga loan.

I have always had ‘debt’. Started with a littlewoods account at 18, and buying my phone at the time on a payment plane. Paid it off nearly always in full. Had a credit card for emergencies, strictly emergencies- paid it off when I could. As a 21 year old grad I could then get excellent credit cards with low interest and benefits that I have continued to use and maintain. Got myself into a bit a hole after a rushed house move once- but 0% balance transfer, no harm done. My rating is still excellent.

i have friends who use debit cards for everything with no payment protection or insurance- why? Because credit cards bad. So many of them have had their cards cloned or accounts cleared through scams. I don’t use a debit card for anything. I’d rather risk the banks money. As soon as my money drops in my current account - it gets moved into 4 different directions.

Credit can be great if you are informed.

Yes I did read the OP...the question was how is it right that people can get money at the click of a button...take personal responsibility for your actions is my reply

@Londongent The OP literally did take responsibility. It doesn't change the fact many people do not understand how interest rates and credit scores work.

"Read the OP."
I have. I have read the OP. Again and again. "How is this right?"
It's completely fine. Unless you want to blame your choice of clothes buying, drinking alot, living beyond your means, on the banks, rather than taking personal responsibility for your actions yourself.

The question is how is it right that credit is readily available because people can get into debt quickly?
It's a heavily regulated industry with a lending criteria, that's how it is right that credit is available to people.

@Londongent

this isn’t strictly true though is it?
the PPI claim ruling uncovered that people had been mislead for years! Payday loan companies also got banned for charging absolutely dreadful APR. It is not true rhar there has been no wrongdoing in the financial sector. The 2008 crash was literally greed of banks over lending to poor creditors.
I was given a 100% mortgage with a deposit loan for a £100k flat when I was 20 years old in 2000 and earning £14k Pa. It was so easy to get it was crazy back then. It has changed now for the better in some ways but many of us were sucked into constant bombardment of how easy it was to pass a flimsy credit check

Yabu. As a grown adult you should be able to plan your finances and not spend on credit cards you can't afford. Unless you have learning difficulties of course.

It is recommended by money experts that ideally you should have a minimum of 3 months wages in savings available for emergencies/job loss. I get for many people that is a pipe dream.
But I know several well paid people (I'm talking higher income tax bracket) who have absolutely no savings, but go on expensive holidays, eat out in posh restaurants, nice clothes etc.
The coming recession and interest rate rises are going to really hurt some people.

A lot has changed in 14 years. PPI claims have been paid by the banks, lending criteria for payday lending companies have been tightened (putting companies like Wonga out of business) because of regulation.
But the FCA and PRA are not concerned with how readily available credit is.

My cooker is currently broken, I have one hob and oven working.

So it still works then?

But I know several well paid people (I'm talking higher income tax bracket) who have absolutely no savings, but go on expensive holidays, eat out in posh restaurants, nice clothes etc.

I know lots of people like this, many have parents to bail them out.

@Londongent

Op was talking about those days though wasn’t she? When credit was way too easy, and it followed you through adulthood. Based on her own experiences she was concerned about available credit. Klarna is a good example of where it is still targeting the vulnerable and impressionable - it’s aimed at girls who buy clothes online, just in a less obvious ‘Wonga’ way