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 need to reign.in your spending OP. You say you don't understand how credit cards work, but it's really simple. You put things on credit, then pay the money back later plus interest.

But if you have it but pretend it isn't there, you won't get tripped up if something unexpected comes out of your account or by something like a self service petrol pump blocking a chunk of your money for a few days. Can save other payments being refused in these circumstances.

The main reason I ended up in debt was caring for disabled children, not being able to work, having unavoidable expenses. Of course I had control of the finances, but living in the dark and eating only baked beans doesn’t work with disabled children, or at least not my children! I did the best I could under difficult circumstances.

I don’t go on holidays (actually this year I do, but only because a family member is taking me), I don’t buy clothes unless I absolutely have to, over the whole year my main frivolous expenses haven’t amounted to much more than £70, so not a catalogue of poor choices.

I thought I was shit with money, but having to go through my accounts thoroughly has shown me that I’m not as bad as I thought, so having more money coming in and sharing most bills from September will make a huge difference.

I didn’t understand credit cards on my first card, which has meant that I’ve been paying off the interest on two vet bills and a purchase of heating oil rather than paying it off (the card wasn’t 0% on purchases, which I didn’t know). I know this now, and because my ex is moving back in and I can finally start work my finances will improve, and all being well I should be completely out of debt within 15 months.

Until my finances are absolutely cleared I will retain a small overdraft but not use it unless absolutely necessary.

Thank you for all the advice I’ve had here!

But if you have it but pretend it isn't there, you won't get tripped up if something unexpected comes out of your account or by something like a self service petrol pump blocking a chunk of your money for a few days. Can save other payments being refused in these circumstances

Whenever you do a balance transfer, there's a reason the number 1 piece of advice is to always close your old credit card. Because people who've used credit before, for whatever reason, are usually not very good at ignoring their available credit. If you don't cancel the old credit it usually gets spent again and then you have two debts and are in a worse position.

Having an overdraft limit available isn't an essential, even if you're on the breadline, and it definitely is not a sensible decision for someone with a history of problem debt.

Luckily my debt problem is mainly down to circumstances, which are changing.

Whoever you spoke to was not Stepchange btw. Sc are inbound calls only, don't pass on your info to any third parties and don't chase up paperwork like that.

There are firms that dupe Stepchange - which number did you call?

From this website..

https://www.stepchange.org/?gclid=CjwKCAjw29ymBhAKEiwAHJbJ8qvb66DpxHmmZpcMWfoKAIjSqSA35ANatzLzGSEgxQMvEU0QeP9hdhoCUToQAvD_BwE&gclsrc=aw.ds

In hindsight I was quite shocked at the advice.
They weren’t interested that my circumstances are changing soon, they seemed very keen for me to go on a budget plan.

The man I spoke to rang me later than day to ask had I signed the paperwork, and seemed put out that I was taking time to think it through.

It does sound like it maybe wasn’t genuine.

Stepchange do not make calls out, they do not consolidate debts, they do not use an "accountancy" firm, they do not pass contact details on to accountancy firms and they do not make outbound calls chasing up paperwork like you described.

If you did speak to someone it definitely wasn't Stepchange.

This is who I rang.
The link I shared above is the website.

I was first advised to apply for an IVA, but when he learnt I am a homeowner he advised a budget plan through Clear Start Accountants.

Is the website I linked to above not genuine? Should I be reporting this?

I’ve googled the number I rang and it goes straight to Step Change.
I can’t see that I’ve got this wrong.

Bit weirded out about this, as I rang the number above on Tuesday.

I’ve just rung the accountants I was referred to to ask about it, but my referral came from somewhere called Best Finances, even though I rang the step change number.
The financial advisor confirmed that they do get referrals from Step Change, and advised against using them as they are largely funded by creditors and refer more people than they should onto credit plans.
So now I don’t know who to trust at all, and will aim to pay off all debts and go and live in a wood somewhere with no contact with the outside world!

I have no idea how this has happened.

It's well known that commercial services imitate charities and government organisations in order to trick people into paying money for services that should be free or signing up to IVAs that are not necessarily the best solution to the individual.

The real Step Change has some advice about this which may be useful:

https://www.stepchange.org/make-sure-its-us.aspx

I did make sure it was them though!
Everything seems above board and not a scam though, thankfully, but I just don’t understand how it happened.
I rang the official StepChange number!

I had an overdraft and a credit card and it was the most stressful time of my life.
I literally had to stop spending every single penny I could get away with. Meal planned everything we ate. Sold everything I could (Vinted is very easy).
when my income went up I didn’t take a penny of it and put it all into debt.
mentally I put milestones in my way to head for - like OD down to £1000, then £500 etc. I found that helped a lot. I then went the other way until I had several grand in my bank account.
I don’t allow myself to go below £1500 now as that’s my buffer.

You definitely did not speak to Stepchange. They do not suggest any debt solutions before knowing your situation - one of the first questions they ask is your living situation+rent/board/mortgage/own).

They would never suggest an IVA then discover you are a home owner. Additionally being a home owner does not preclude you from having an IVA anyway.

Step Change absolutely DO refer some people to third parties.

I was very unimpressed after an elderly relative of mine was referred by them to a very salesy firm for information on equity release mortgages. Who pestered her for weeks. The general advice she was given by SC was fairly poor overall and she was given 100% incorrect information about how Defaults affect your credit file and about the difference between Defaults and CCJs.

I 100% assumed she'd been scammed too and was astounded when I discovered myself the referral was genuinely from SC (and no, I didn't get sucked into the scam myself).

SC have their place but I would be very wary of blindly trusting them. Their front line staff aren't qualified, they're often 20 year olds earning £23k and fielding these calls after a couple of weeks training. I don't think most people realise this.

IVAs are an alternative to bankruptcy for homeowners in the right circumstances, ie debt that is significant and unaffordable.

If renting, bankruptcy or a DRO would be the solution.

But the above is usually for people in a lot more debt than the OP.

For the OP it's clear the solution is to minimise interest, and see how it goes with ex H moving back in. Maybe reassess after a year as to whether a formal debt management plan is needed but hopefully not.

Good that you have managed to get balance transfer and money transfer cards. I would remove the overdraft limit completely. It is the most expensive way of borrowing and having it there may tempt you to continue using it. Saving for emergencies is a better option.