High interest credit card

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Hi

I’ll try and keep this brief but I lost my job during Covid and had to use my credit card for quite a few months to survive, paying back only the minimum payments. I hoped that when I was back in work I would be able to clear this but have had to take a much lower paid job. My children’s school changed their times to prevent all pupils and parents turning up together and this made it impossible for me to get to work on time so I have also had to pay for breakfast clubs. I have claimed the tiny bit of Tax Credits towards childcare but my outgoings are still up quite a bit.

So this credit card now has a balance on it that I’m struggling to clear with a much smaller household income after childcare. The interest rate is horrendously high and even if I keep to minimum payments, I’m paying pennies off the actual debt. It’s costing me so much and it’s making it very difficult for me to do anything with my kids outside of school.

I have tried applying for other jobs and earning more doing odd surveys etc but some of this has dried up recently. Anyway, my question is if I default on the debt, will the interest stop or will they continue to add to it? Defaulting is a last resort but I won’t need a mortgage or any other credit cards or loans so I could manage with a tarnished credit score. I’m pretty sure it will go down that route eventually anyway but I’m begrudging paying so much in interest just to keep them off my back. I’m barely able to afford essentials other than food at the moment and this can’t continue.

I appreciate that this isn’t a great idea but I would do anything to just minimise the interest, even if it does result in a black mark on my credit report. I’ve tried to contact the credit card company and ask if they could freeze interest but they’ve refused as I’m currently making my minimum payments. They’re vultures!

If anyone knows whether interest will definitely be frozen if I default and also if it’s passed to a debt collection agency, would they be able to increase the debt with charges or would my debt remain the same so I can just arrange an affordable repayment plan?

Thanks in advance x

Interest and charges can still be added to a defaulted debt unfortunately. Have you looked into 0% interest balance transfer cards?

Should have added that I can’t do any debt management plans as I’m a home owner and I can’t give that up to free up equity as we’re needing to apply for school places again next year and the only cheaper areas are in another catchment which would mean I struggle getting kids to various schools in the morning. I’m also unable to get a 0% card or loan as credit score isn’t high enough for anything at the moment with my available credit maxed out - all soft searches have rejected me for anything decent.

@Whattheschitt

Interest and charges can still be added to a defaulted debt unfortunately. Have you looked into 0% interest balance transfer cards?

Sorry x posted, just saw your update.

Sorry to hear about your job.

I’m pretty sure if the debt gets passed over to a debt management company and you default there will be extra charges on top. Do you have other debts too? It might be worth speaking to Step Change for advice.

Are you set up for Tax Free Childcare? That could help bring that bill down if you’re not already using it. www.gov.uk/get-tax-free-childcare

From your update, given you’re a homeowner I assume you will need to remortgage at some point. I would absolutely avoid defaulting if possible as you don’t want to be left being unable to get a new mortgage deal.

Remortgaging isn’t a massive issue as I thankfully don’t have too long left on the mortgage (4 years) so I could manage.

I do have a debt with a catalogue company for a fridge/freezer that broke whilst I was unemployed. I am up to date with payments and this is 0% as long as I can make the payment before my due date in 5 months but I won’t be able to afford this at the moment.

I have a loan too for my car. It’s nothing flash and was for a 5k car two years ago when I could manage repayments. This comes directly out of my pay at the moment as it’s with a credit union. I can’t sell it as it’s not worth a fortune and I have to travel quite a bit for work so I need something reliable. Prices are also a lot more expensive now for a used car so doubt I could get much for less than I’m paying now.

I feel like I’m in such a mess and struggling to see a way out.

Sorry for drip feeding but yes I am registered for the tax free childcare but paying out for 3 kids isn’t cheap. My previous employer was flexible and would have let me juggle start/finish times slightly but my new employer can’t change the times and the later start at school has really made things tough for me.

Head over to Money Saving Expert.
There's a credit card section and something called Debt Free Wannabe.
Very helpful and knowledgeable people who have been in your situation or worse.
You'll be asked for a SOE which is a statement of affairs but it's not compulsory.
Best wishes Mx.

Mine defaulted (well I rang them and discussed with them)
They froze the interest, it's with a debt company, I pay £50pm and they leave me alone. That's it. It does show as a default but I've managed to recently remortgage with a shit credit rating and 3 defaults so....

Thank you @maras2 I have registered for an account on mse but I’m waiting for approval. I will definitely try a post on there though and see what they recommend. I was just hoping that I could take a hit on my credit score and default so I could stop the horrendous interest. I have no issue paying back the debt and with some interest or charges but it will cost me thousands at this rate and have me living from hand to mouth for years. I’m terrified something will break at the moment and I’ll have to choose between making my minimum payment or sticking something else on the catalogue and risking not being able to pay this off as it also has high interest if not all paid off before the interest-free term is up.

Thanks @NotMyCat I’m just scared I’d let it default and they will continue to charge the same interest but perhaps also add charges on so I’m paying even more. If I knew this wasn’t allowed and they would have to freeze it, I’d do it now just so I can breathe.

Again, best wishes.
It's no good telling you not to worry but be kind to yourself.
You made a genuine mistake.
Try to sleep and things may seem clearer tomorrow.

I had help from Christians against Poverty but there are other debt agencies out there. They got the credit cards to freeze interest and I paid a very small sum per month to clear off the debt.

Have you actually applied for a 0% credit card, rather than just assumed that the soft searches information is accurate? Because in my experience it isn't, they tell you you won't be accepted but you might be after all.

I would try to apply for one or two, you have nothing to lose and even if you don't get the best offer, they might offer something better than you have now. Have a look at the available offers on Moneysavingexpert and make an application, you have nothing to lose and a lot to gain. I'd avoid Sainsburys as they seem quite strict, MBNA, Barclays and Virgin (if your current card is not with one of these) less so. Or maybe if you get rejected for one of these, try your own bank if you have a good relationship with these? They might have an offer.

Another thing to look at if you can't get a 0% is to see if you can get a low interest balance transfer so you pay less interest, or a 0% purchase card, where you can put some of your normal spending like groceries and petrol on the 0% card, and pay the money you would have spent off the high interest card instead.

Secondly, while you're on MSE, have a look at their money makeover, to see if you can cut some of your essentials and make any extra money, to free up a little bit extra to throw at the credit card, whether you can get a low rate card or not.

www.moneysavingexpert.com/family/money-help/

There's also signposting in this section to help with debt, where you can have a read up on the persistent debt rules. These mean that if you pay more interest than the outstanding balance, you can then get some sort of help, to stop you paying high interest forevermore.

But if you think you can make slightly more than the minimum, you could set up a standing order for a bit more than the current minimum and it will start to make a difference in time, eg if you just continue to pay the minimum, it gradually reduces as your balance reduces, but if you set a standing order for the current minimum plus say £10 and keep paying that, the balance will start to reduce, and the interest will start to take less and less of the payments you make and if you do that for a few months or so, you might then be able to have another go at a cheap balance transfer.

Good luck