People in extreme debt - is this really as common as I’m told?

[Lesterzap]

Chatting to my friend today who works id debt management. She was saying how busy it’s been since covid and COL crisis.

I mentioned how someone I know had ended up owing 20k. According to my friend 20k of debt is now a drop in the ocean and that there’s been a real increase in people in higher incomes owing 70-100k!!! Totally shocked by this. Aside from my mortgage I’ve never owed more that 5k (car loan)

surely that level of can’t be common?

We pay for literally everything on credit cards, then pay it off in full as soon as it goes on the balance, this keeps our credit score high as having zero credit all the time bizarrely lowers your score, plus we get cash back every month, win/win.

If you're going to do that then why not just pay for your food shop out of your normal income on your debit card? Fair enough a vets bill, car repairs etc but food shopping?? Unless you're desperate of course. You're still paying a yearly fee for it. I haven't misunderstood anything.

Lots of cards don't have annual fees or the annual fee is just offset by other benefits. Some may be trying to build credit too.

These weren't the higher end low interest credit cards they were more then often those bad credit credit cards.

Far enough but the point people are making is that using a credit card for a food shop doesn't necessarily equal desperate.

What fee, there’s no fee on any on my cards. Quite the opposite, they pay me cash back.

My vauxhall vectra cost me £500 on eBay from a Vauxhall car dealership . I've had it 2 years and besides new tyres and a new bulb it's going strong. I put £30 a month aside for a new second hand car for when this one goes to scrap

@fullbloom87 would it pass ULEZ then?

and your £500 car doesn't negate the fact cars have got more expensive...

You’d like to think so wouldn’t you? I know at least two people irl who are having sleepless nights about their fixed mortgage rates ending.

@CherryPieMadness can I ask why you have to care for your mum?

Exactly, what fee? We put all our daily spending on the credit card, have done for years.....never paid interest and get John Lewis vouchers back. Hardly desperate.....savvy is what I call it.

I obviously wasn’t clear. Regardless of whether student loans are “real” debt or not, they form attitudes to debt. Once you’re comfortable with the concept of owing huge sums of money it makes you more relaxed with further debt. The “might as well be hung for a sheep as a lamb” principle.

We finance our car through PCP, essentially we rent it so I find it interesting that some people regard it as debt because we don’t owe the money, we pay for the use of the car every month. I put every penny I spend on my credit card and pay it off every month and am rewarded with John Lewis vouchers for doing so, that feels sensible to me.

@BitOutOfPractice I don't understand why would I like to think so? having sleepless nights doesn't necessarily mean you are actually in the shitter. One of my friends is "stressed" about her new mortgage payments, yes she has less disposable income but she still has plenty. Another friend is worried about her fix ending next yr but not worried enough to not go on holiday/stop renovations. She's got a mortgage free BTL so she has options.

Now or course some will actually be in the shitter but my point is most of the more well off do have more options & access to more options than the less well off. Look at pay increases due to COL/inflation, the highest earners are getting the biggest increases.

I have to say, this is a refreshingly honest thread. Most of the money related threads in here involve people who have 100k salaries, no debt and £3000 per month disposable income!!

I have credit cards with an available Iimit of about £50k so that is quite a bit of debt I could be in for a start. I pay mine in full every month though but if I wanted I could spend the lot and pay the minimum.

We finance our car through PCP, essentially we rent it so I find it interesting that some people regard it as debt because we don’t owe the money, we pay for the use of the car every month.

I see car finance as more like renting & whilst not used myself yet I don't see the huge problem with it.

"Analysis by the TUC of official figures also shows that workers among the top 1% of earners, with an annual income of at least £180,000, were paid 7.9% more than last year, up from 3.7% in January."

"while workers receiving £26,300 a year saw an even bigger fall in annual wage rises, from 9.5% in January to 4.7% in April."

Re PCP, with my last car when it came to the end of the 3 years the dealership valued it at higher than the balloon payment. It does definitely feel more like paying for the use of a car than 'proper' debt and, like my home, the debt is attached to something worth money so I could sell it and get something cheaper if my circumstances changed. Having said that I am paying £250 a month for mine and the vibe I got from the dealership (and the prices of the cars!) suggested I was buying at the cheaper end of the market despite having an income well above the national average and living in a very average income area.

Actual credit cards I think are a bigger problem. I got into credit card debt over a few years of randomly fluctuating income and a wedding but finally paid everything off completely last year. I now use one occasionally for protection on big purchases and pay it off the next month. The reaction of my card providers has been to up my credit limit and to email me every couple of weeks with 'offers'. I'm annoyed enough by this and have a comfortable enough income that I find it easy to resist but I can totally see how someone with less disposable income and something like a kid's birthday coming up could get drawn back in. We are supposed to want 'the best' for our families.

70% of cars are PCP these days. I used to think someone was rich if they had a nice car, now anyone can get the car they want by 'renting' one. Bloke down the road has a Range Rover, but couldnt afford to pull his heating on. I just don't get it?

Credit cards aren’t always the devil. It actually helps with credit ratings to have one and is essentially “free” insurance if you buy big purchases on it. We managed to get our money back on a bankrupt kitchen fitting firm through paying for it on our card for example - money we would otherwise have lost. Some also have rewards or offer brand discounts, so it can work favourably for you there too.

So in all those cases if you ALWAYS pay it off in full every month you’re better off having one than not. If you would be in that camp then I’d actually consider getting one.

However (big however) if you aren’t managing your usage, that’s where the problem lies.

I don't do debt.
It all comes crashing down way too easy.
And I'm fucked if I'm paying hard earned money in interest.
Rich people are rich because they make money work for them, not the other way round.

I used to think someone was rich if they had a nice car, now anyone can get the car they want by 'renting' one.

That's not quite true though is it. You have to have the income to afford the monthly payments in the first place.

Rich people are rich because they make money work for them, not the other way round.

Rich people do use debt eg the majority will get a mortgage despite being able to buy cash as the cash will work harder somewhere else.

Personal debt average 33k

Unsecured average ( excluding mortgage ) over 3.7k , over 10k for younger households

Those are averages

As you say many people have no debt

So the extremes could be very high

I wonder if the 70-100k relates to couples? Still an enormous amount but I suppose more easy jf factoring in 2 cars etc

What shocked me was when I worked in a supermarket and I'd say 99% of customers were paying for their food shops in a credit card.
I've never had a credit card in my life

I always go shopping with a credit card. I do not like taking my debit card out of the house.

I know people who use credit cards to accrue points or airmiles for travelling. They just pay it off.

I meant “one” would like to think so. General you, not you you. 😊 In terms of you saying that people with huge salaries and huge mortgages would be savvy and have Savings and investments and equity and the like, as you described. These two people I mentioned with close to a million mortgage, are really sweating on their fixed rates ending because they’d done what a lot of people do, lived right up to their means.

of course the worst off will be even worse off. That’s always the case. But I don’t think those that outwardly look wealthy will all be immune.