I’m shit with money, need some advice about credit card debt please!

[Mousehoel]

I have a 0% interest credit card with £5000 on it (I’d hoped to have a big chunk paid off by now, but COL and me not understanding the credit card very well means I still need to pay this off).

The 0% interest is coming to an end later this month, so most of my monthly payment will be covering interest. It’s going up to 21.66%.

I pay £75 per month off the credit card.

I also have an overdraft of around £2000, which (I’ve just added up now and feel a bit sick as I didn’t realise) costs me around £62 a month in daily overdraft fees.

My financial situation isn’t amazing, but should improve from September, and I’d like to prioritise getting rid of these debts.

As far as I can see I have three options:
1 scrimp and save, keep going with current credit card, pay off what I can when I can and pay loads of interest.
2 Change to a new 0% credit card, and keep the overdraft, pay off what I can when I can.
3 Get a personal loan of £7000, pay off £140 each month and more when I can.

Like I said, I’m shit with money. I’m completely out of my depth with this and would love some advice!
Thanks in advance 🙂

You don’t need Netflix or ITunes - you’re in debt and they really are non essentials when you’re in that position. Amazon Prime is REALLY a waste when you’re in debt, apart from the temptation of actually using it to buy stuff!. So while your circumstances sound hard I do think you can be more frugal than you’re being. You say that you are different to your ex in that he will happily live off baked beans and sit in the dark in the evenings to save money. These are exactly the type of things that you could be doing for a couple of years - all these little things add up.

Your mindset may need to change. When you owe money, then the money you DO have needs to be spent only on absolute essentials. The “I need those to wind down” thing, you can do other stuff to wind down that doesn’t cost you money, just while you’re clearing the debt. If you have internet then play music through YouTube for example. It honestly really is the little things.

Definitely tackle the overdraft first, it's hugely expensive debt

Have a look at Moneysaving Expert for advice on all manner of cost cutting to free up money to get out of debt

https://www.moneysavingexpert.com/loans/debt-help-plan/

On streaming services, Now TV is cheaper than Netflix - there are often free months, and if you cancel they will offer you a deal. We've had it on and off for years and never paid anywhere near full price, while as far as I can tell, there are no deals available on Netflix.

Hi OP,
Have you ever had a look at
https://www.entitledto.co.uk/

Play around with the circumstances you put in. I gather working single parents are well supported (and you mention you can do some work). Take a look at some scenarios and you might find that it is worth moving across to universal credit.

Are you sure you want to go ahead with this plan of living with the ex? Surely there is a reason he is an ex? Most people that are single parents posting on here after separating from an ex sound like they have no regrets and love being in charge of their own affairs. Can your ex do some co-parenting or pay some maintenance without moving in?

I’ve had a look at entitled to, and at the moment it’s not 100% clear as I’ve just sent a DLA claim off for my youngest, and it’ll be a while before I know if he’ll be awarded it.

I’ve looked at my basic bills and benefits cover those, but not if my car breaks down or I need to heat the house.
H is in a similar position as his rent has gone up.

We get on, and as a temporary measure I think this will work well. It also means he can take on more childcare in the evenings to free me up to explore some creative ideas I have, which I’ve never had any time to do.

There are reasons he’s an ex, so he knows there’s no chance we’ll get back together, but at the same time we still co-own our house, and we have children together. We can make this work.

I’ve been approved for a credit card - 15 months 0% interest with no transfer fee.
£8300 limit (no I will not be spending anything on it at all!!). I just need to work out how to transfer the balance there.

I’ve worked out that if I work and divert all my working income, I could have it paid off in 14 months. This will still leave a bit spare for car emergencies and fair contribution to Christmas.

It’s all looking a lot more hopeful than it was.

That's good news re the balance transfer. If you can't see how to do the transfer on an app or website you might be able to give them a call on the phone and ask a call centre agent to help you.

If you are allowed to do a money transfer at the promotional rate you can use it to pay off your overdraft. I think your credit history must be good to get that credit limit so you might be able to also look at a money transfer card if yours does not offer this. Don't draw any cash out of an ATM with the card though as that attracts high interest rates.

The tricky bit is not spending on the card you pay off or going into your overdraft again but it sounds like you have a plan.

Now you have the interest free credit card what you could do is get a normal credit card. Transfer balance £2k to the interest free one.

Then use it for the food essentials etc. the sole purpose is to clear your overdraft asap because of the fees you pay on that.

Because H is moving back in I’ll be in a really good position to pay it off.
When I get the card I’ll ring up and get someone to talk me through it, thanks for that tip!

I don’t plan on using it for anything else but using it to pay it off without interest.

You can't often get a cash transfer at 0% on promotion which is why I suggested a 2nd credit card to do a further balance transfer that way to get rid of the overdraft.

Ask if you need to go down that route. You just need to be ruthless about it being for essential expenditure only and once you hit the limit of what you transferred not using it again.

I used 0% balance transfers in this way to over pay on our mortgage to save us £££ in interest charges- we can overpay without penalty.

I previously had a 2k overdraft and was never out of it. My bank put me on a reducing overdraft decreasing by £100 a month.
I was terrified and didn't think I could manage but guess what? I did and in under two years they forced me out of it altogether and it felt amazing.

You could ask if this is an option, even it's it's £50 a month. Not only will it reduce your debt but it removes the option to get back into it.

The card I’m getting would fit both credit card balance and overdraft, if I’m allowed to do that.

Yes it gives you enough but it's unlikely you will be able to transfer £2k in cash to your bank account that will be interest free.

Ah ok, I see what you mean.

If your card includes 0% on spending for purchases made in the first 3 months or similar, you can tackle the overdraft by paying for things like groceries and other essentials on the card so less money is taken from your current account so your overdraft is paid off that way. Obviously don't use as an excuse to overspend.

Then when you've dealt with the overdraft then concentrate on the credit card.

Shopping will come out of a joint account, so my account should be straightforward to get it out of overdraft.

I’ve looked at other cards, and I’m unsure which category clearing an overdraft comes under. Specific googling leads it to balance transfer cards - does this mean that I could transfer both the credit card balance and the overdraft across?

To the same card I mean.

I'm really not sure you could ring and ask if transferring from your bank account counts as a balance transfer or a cash advance

I googled and found out more.
I think I’ve sorted it, so if final checks are successful I’ll hopefully be approved for another card and it’ll clear my overdraft, and the monthly payments are the same as my overdraft fee!
Once working I should be able to clear this quite quickly.

I’ve been approved for the card, but have just had an email saying that the balance transfer (of money from credit card to pay off my overdraft) has failed - I’m very much hoping that this is some sort of glitch, and once I have the card I’ll be able to sort it!

I actually did pay off a credit card debt of around £12k by getting a loan. As soon as I paid the card off, I requested that they drop the credit limit to £500 so I couldn’t run it up again. It took four years to pay off the loan but since then I’ve been debt free (aside from the mortgage!). I haven’t used the £500 limit at all but it’s there in case I ever need it.

I’m also terrible with money and I just wouldn’t have been disciplined enough if I’d moved the debt on to another card, even a 0% interest one.

I had that happen before and it was because I hadn't received the card and activated it.

You haven't defaulted on existing credit card yet have you?

No, no defaults on anything.
I’ve just received the activation code today, so failing because of that makes sense.
Card could take a week to come.

Once I’ve cleared the overdraft onto the card I’m going to reduce the overdraft limit to £500, but aim to never use it.

I will not be spending anything at all on the credit cards, and for the foreseeable future any spare money will be paying off both credit cards.

I start a job in September 🤩🤩 which feels very freeing! Could not have done this without H moving back in.

Once I’ve cleared the overdraft onto the card I’m going to reduce the overdraft limit to £500, but aim to never use it

Why? If your aim is to get out of debt, I'd remove the overdraft completely. Work on building a small amount of savings for immediate emergencies but leaving an OD on your account seems unnecessary and unwise.

I’ve been approved for the card, but have just had an email saying that the balance transfer (of money from credit card to pay off my overdraft) has failed - I’m very much hoping that this is some sort of glitch

Also @Mousehoel ...you can't use a balance transfer credit card to repay an overdraft. They can be used to repay credit or store cards only. You'd need a money transfer card.

Until I’m in the clear (which shouldn’t take too long) I don’t want to write off the flexibility - I’ll still need to pay bills and allow for emergencies. Once I’ve built up my account I’ll take away the overdraft option.

you can't use a balance transfer credit card to repay an overdraft

I’ve taken out a second card with 0% money transfer for that, the minimum repayment is the same as my current overdraft fee.