Paying a HUGE Credit card bill

DaBreno

A buddy of mine has confessed that he has run up what can only be described as a savage credit card bill 5K+ (he sites moving house as the reason). His interest payments each month come to over €80 yoyos.
I thought for some reason that the best thing to do in this situation was to get a personal loan from the bank to pay the CC coz the interest would be lower. Not sure where I heard this. Does it make sense or is it all the same anyways?

Cheers.

Tusky

DaBreno wrote:

A buddy of mine has confessed that he has run up what can only be described as a savage credit card bill 5K+ (he sites moving house as the reason). His interest payments each month come to over €80 yoyos.
I thought for some reason that the best thing to do in this situation was to get a personal loan from the bank to pay the CC coz the interest would be lower. Not sure where I heard this. Does it make sense or is it all the same anyways?

Cheers.

I would guess that the interest on a loan would be much lower than CC yeah.

Dades

Make sure he gets his limit cut to something small after though.

Otherwise it could easy happen again... :eek:

That isn't too bad...

Just put in more than the minimum amount in each month so he isn't pissing against the wind.

True the interest rates will be lower but you are just robbing peter to pay paul. If you pay off the credit card quicky the interest is negligble. However, if this card has been sitting for a while what point is there in paying even more interest to pay off the cc debt?

delly

How about moving credit card company and getting an introduction period of 0% interest?

HelterSkelter

Personal loan would definitely be better. APR on a personal loan is usually 12%, credit card APR is around 19%. I know several people who took out a personal loan to pay their credit card bill.

HelterSkelter

delly wrote:

How about moving credit card company and getting an introduction period of 0% interest?

Even better idea!!

grumpytrousers

ronoc wrote:

That isn't too bad...

Just put in more than the minimum amount in each month so he isn't pissing against the wind.

True the interest rates will be lower but you are just robbing peter to pay paul. If you pay off the credit card quicky the interest is negligble. However, if this card has been sitting for a while what point is there in paying even more interest to pay off the cc debt?

Disagree with your analysis. You ARE still robbing peter to pay paul, but if Paul charges a sod of a lot less in interest, then it's the way to go. Credit Cards should NEVER be used as any kind of long term finance. Paying 'over the minimum' is a mugs game - the only way to attack a large credit card debt is to make large dents in it over a maximum of 3 months. Any longer and you're getting fleeced....

Sleipnir

The problem many people face after paying off their credit card with a personal loan is they find they have run the credit card bill up again. Quite quickly, they're paying for two loans.

grumpytrousers

Sleipnir wrote:

The problem many people face after paying off their credit card with a personal loan is they find they have run the credit card bill up again. Quite quickly, they're paying for two loans.

oh aye - but that's where a bit of feckin' discipline kicks in. To run up a large credit card bill once is forgiveable...we ALL do that, but it's the best evidence you'll ever have that you're living well beyond your means.

To run it down by using a loan and then drive it up again is a sign that you REALLY should take a scissors to it and use one of those 3V things for web-use etc...

irlirishkev

Sleipnir wrote:

The problem many people face after paying off their credit card with a personal loan is they find they have run the credit card bill up again. Quite quickly, they're paying for two loans.

Then they shouldn't really have a credit card! One way ticket to brokesville..

DamoKen

ronoc wrote:

That isn't too bad...

True the interest rates will be lower but you are just robbing peter to pay paul. If you pay off the credit card quicky the interest is negligble. However, if this card has been sitting for a while what point is there in paying even more interest to pay off the cc debt?

have to disagree with this too, any personal loan will charge way less interest than a cc loan. And if you've just bought a gaff, chances are you aren't going to be paying off 5 grand too quickly, more like a few years. OP, you mentioned that your mate cites a house move as the main reason, I take it from this he now has a mortgage? If so he's more or less in the same position I was a few years back with a hefty amount owing on my credit card due to the necessity of paying back people who'd lent me to make up the deposit. What I did was approach my mortgage provider and got a home improvement loan out of them at a really low interest rate, almost 6% lower than my bank offered if I remember correctly, that I used to pay off my credit card plus a bank loan I'd also needed. I calculated at the time that it saved me in the long term over 2.5K in interest charges.

Sponge Bob

5k is a Car Loan over 3 years territory loan ...... but I wouldn't tell yer mate until he chopped up the CC and agreed not to get another one for a year or two.

some people are too stupid to have CC's

viking

delly wrote:

How about moving credit card company and getting an introduction period of 0% interest?

Yep, and when that introductory period is over move to someone else, and then someone else etc etc

Credit card surfing...

voxpop

5k isnt that much - i had about 8k of cc debt over 2 cards. I cleared that with a tescos loan (7.9%) and got rid of one of the cards. The only thing you have to watch with credit cards is that you are not living off the credit card i.e. spending more on the card than your paying back each month, otherwise before you know it you'll be up to your neck again.

Hobbes

I would recommend the first thing to do is cut up the card. Until you pay off the loan you are only going to hurt yourself with an active credit card.

Kernel

Credit Union tbh.

And cut the limit on the card to about a grand to cover emergencies.

The Sweeper

There are three solutions:

1. Pay off your interest + a sum off the principal every month.
2. Become a rate tart and transfer your balance from card to card with 6mths interest-free or somesuch.
3. Take out a personal loan and pay off the credit card with that, then pay the loan off at a lower rate of interest.

However there is one further problem; if your mate isn't managing his cashflow, and is living beyond his means, then none of the three things above will help. He needs to do the following:

• Map out his budget. He needs to track everything that comes in and goes out every month. To the nearest fiver. This is vital. If he doesn't do this then he's flying blind. Nothing will help unless he does this.
• He then needs to see what he can and cannot afford. Budgeting is like dieting - drawing up a crash budget will be just as unsuccesful as drawing up a crash diet. He needs to cover all of his bills, some spending money and a set sum every month to blow on incidentals. (Like €60 for those "must have" crap purchases everyone makes.)

Until he properly tracks his spending, he will have no idea what he actually can and cannot afford to pay, therefore he will have no ability to make an informed decision about which one of the three routes out of debt he can take.

For instance, if he already lives beyond his means, and he takes out a personal loan to pay off his credit card, then he'll continue to live beyond his means, and the extras will go on the credit card, and he'll end up with a 5K bank loan AND a 5K credit card bill.

RainyDay

viking wrote:

Yep, and when that introductory period is over move to someone else, and then someone else etc etc

Credit card surfing...

Many credit card surfing offers will only give fairly low credit limits/transfer sizes of 1k to 3k, regardless of your income or existing credit. You'll need to make sure that they will take enough of your balance to make it worth your while. And remember that you'll get hit with the 40 euro credit card stamp duty on each account that you open.

Stephen

This is why i always pay off my credit card in full every month, no matter how much is on it. Its too expensive to use long term.

Jimi-Spandex

I'd recommend going to MABS (Money Advice and Budgeting Service) it's a govt provided service that helps people in levels of debt like that. It's a free service by the way.


MABS

DaBreno

Thanks for the replies folks. Tis quite easy to run a large bill on the CC, Ive done it myself. Remortgaging was mentioned as an option for him, but it can only be done one year into the Account(Permanent TSB anyways). Good points about the loan being used to pay it off, the CC should be cut up or you wind up with two loans. I also liked the idea of reducing the Credit limit on the card, I'll do that myself!
Ah well, better him than me.

nesf

Re-mortgage for 5K?

Seriously not worth doing imho. It would be a lot cheaper for him in the long run to just take out a personal loan to cover the CC debt and try for a lower limit on the card.

Credit cards are handy, but you shouldn't have a limit larger than you can pay off comfortably and quickly. Otherwise you can end up badly in debt very easily.

We've all run up our CCs at some point or another, but you need to learn some responsibility with them. The interest rates are very high, it's really not worth it to use them as a form of credit over any appreciable lenght of time. Personal loans are a lot cheaper and easier to manage.

chump

If I was him I'd live on the breadline for a few months and make a solid dent in it...

He could give up the booze and the like
Maybe get a perscription for sleeping pills so any time he gets an urge to splurge he can just konk himself out

Sparky

Ive run up a CC bill of 1400, so i have a 30% payment per month, i try not to buy stuff on it, but some things especially on the net are cheaper than the shops in town.
My last balance was 1100, and i am paying 364 per month to pay off, and my interest turns out to be 12 euros per month.
My goal is to fully pay it off by christmas, now with having more money after the bike insurance has been payed off.

RainyDay

Sparky_S wrote:

but some things especially on the net are cheaper than the shops in town.

Sounds like you're kidding yourself - do you build the cost of the interest that you are paying into your calculation about which is cheaper?

Sparky

RainyDay wrote:

Sounds like you're kidding yourself - do you build the cost of the interest that you are paying into your calculation about which is cheaper?

no its just easier to put it on the card, rather than taking out say 300 euros from my account, because most of the time i have DD and SO coming from my account and i need to know i have the money there to meet it.

Im good at paying off things, and my credit with the bank is tops.

Tazz T

5k ain't that much. Transfer to a 0% card, do a montly budget and plough everything you can into it until the introductory period is over. You'll be surprised how much you pay off.

Then transfer to another 0% card.

FrankGrimes

Go visit http://www.askaboutmoney.com and you'll get some very good advice. It'll mainly be along the lines of: change credit card and get a six month interest free period. Get a personal loan from bank or credit union NOW and by the time the interest free period is up youll have saved on interest and reduced the capital sum, thereby decreasing future interest payments.

RainyDay

Bit of a contradiction between

Sparky_S wrote:

Ive run up a CC bill of 1400, so i have a 30% payment per month

and

Sparky_S wrote:

Im good at paying off things, and my credit with the bank is tops.

You really should clear your CC account every month. Making only a 30% payment most of the time is costing you lots of interest.

There is nothing wrong with using the CC account for cashflow purposes, and take the 56 days free credit they offer you. But you should really clear your card each month except for very very tough months.

MorningStar

Tazz T wrote:

5k ain't that much. Transfer to a 0% card, do a montly budget and plough everything you can into it until the introductory period is over. You'll be surprised how much you pay off.

Then transfer to another 0% card.

This is good advise but some people have taken this advise and warped it to make the problem worse. I heard of people doing this and not controlling their spending.

Alot of people here have said we ALL end up with a huge debit on CCs at some point and it is normal :eek:
It's not normal but certainly some people seem to be thinking it is. Generally as far as I can see it is mostly people in their early 20s getting in trouble but older people are less likely to do this. It could be just youth but it seems to be a change in attitude mostly. Younger siblings and friends' younger sibilings most certainly fear getting in debit. Very strange as if I ever want something I save for it first and only use CC as convenient method of payment.
Not really saying one is better over the other but I know which way I feel comfortable with.

whippet

a few years ago I maxed out my CC .. to the tune of about 2K, circumstances at the time were causing me to live above my means (long distance relationship - commuting with Ryanair most weekends etc) ..

I took the option of transferring to another CC with 0% on the introduction rate. The problem, my circumstances didn't change and suddenly my new CC had the 2K plus an additional 3K on it, all the while the original card crept back up to 3K (when I paid it off the bank decided to raise the limit)

After about 6 months of paying the minimum .. I just had to get tough and set aside a minmum of 1K amonth from my wages to pay it off, everything else has to suffer. I managed to clear the cards, but for some reason I still have them, and the banks keep tempting me with increasing limits, on the two of them I think I have about 12K of a limit between them. Thankfully I have learned to be careful with them.

In essence you need to radically adjust your lifestyle and face the fact that you are living beyond your means.

pickarooney

I've never felt the need to have my credit card in the red. I just keep a couple of grand in it and use that money to buy flights etc. on the web. Never really understood the whole idea of buying things you can't afford, tbh.

zAbbo

Stephen wrote:

This is why i always pay off my credit card in full every month, no matter how much is on it. Its too expensive to use long term.

Same here, We should now stand back and admire our smartyness

nesf

MorningStar wrote:

Alot of people here have said we ALL end up with a huge debit on CCs at some point and it is normal :eek:

Personally, I think it's an easy thing to happen once. Twice and you need to rethink how you use it. Anything more than that and you should start cutting up the card tbh.

Sparky

tbh, i always payed my CC bill 100%, but i done a 30% till its payed off, im upping it to 50% when it go's down to €800, which should be next month

The Sweeper

Yeah - BIG warning about being a rate tart - transferring your balance is a euphemism for opening a whole new bunch of credit cards... so you can have one card with a 5K load on it, and keep applying for cards to move that around, and suddenly you have six credit cards...


...six credit cards...

[nervous tic starts]

MorningStar

nesf wrote:

Personally, I think it's an easy thing to happen once. Twice and you need to rethink how you use it. Anything more than that and you should start cutting up the card tbh.

I can see accidentally spending and extra €100 or so but after that you learn. We seem to be talking more like a thousand or more. It seems to be a build up on debit that is completely crazy. This is not normal or advisable in anyway. THe idea of getting in to debit for nonessential items is a little sickening and it is hard to see it as anything other than greed.
THe suggestions here seem to say it is acceptable and no big deal is very concerning. It sounds like in a few years we are going to have a bunch of 30 somethings living at home wearing expensive clothes and in massive debit.

seamus

It can be surprisingly easy to find yourself pushing over a grand onto your credit card, though I'm not so sure about €5k. I generally find myself with "surprise" expenses on my credit card, when an essential comes up that you can't afford to pay out of your pocket. For example, I found out recently that my insurance company had failed to take out a scheduled amount for my premium, and asked straight out for the full cost up front (minus the deposit). €850 that had to go on my CC (I wasn't in the mood to argue it ).

Siogfinsceal

lots of my friends had this problem. Credit cards have a really high interest rates. Best thing to do is get a loan off a good bank to cover ALL your outstanidng debts (credit cards, student loan, etc) and pay off all of these. These means that you can consolidate your money owed into one payment that you have to pay off, th einterest is less and you can even get the loan for a littl emore than you owe to tide you over.
Try TSB they are excellent my friend owed 8k through various credit card etc and TSB gave her a loan for 9, she paid off everything and now just has one payment per month

MorningStar

Siogfinsceal wrote:

lots of my friends had this problem.

What kind of age were they when they got into trouble? What did they spend the money on?

Siogfinsceal wrote:

Credit cards have a really high interest rates.

Well now if anybody doesn't know that they are going to experience a lot more problems than a credit card one.
A friend of mine has a belief that it is connected to misunderstanding by people. In the 80s many people had to use hire purchase to buy things so the mentality of monthly payments and debit has been passed on. As the economy got better some people kept the idea of debit and but many kids have mixed up neccessary debit with recreational debit. It seems to be seperated by a few small years basically anybody born from 1980 onwards seem to think debit is not a problem. One thing I fear is being in debit and there being no jobs but that is the way I remember things.

Siogfinsceal

Yes I totally agree. Im terrified of being in debt and cant stand owing anyone money. This comes from the beliefs that my dad instilled in me - never owe money to anyone , own what you have even if it is less impressive etc.
Im always mystified that some people are not bothered by the fact that they owe money. nooow dont get me wrong i have no problem with people who owe money to institutions such as banks, credit card co etc. what i hate is people like my ex-friend who owes me a load of money but doesnt care! also people I work with who will openly ask everyone to lend them a tenner but forget to pay it back....wierd!!

Flukey

The best way to use a credit card is to adopt a pay now, buy later approach instead of the standard buy now, pay later method. In other words, instead of paying for your Christmas shopping in January, start sticking money into your credit card now, get it into the black and come Christmas there will be money there to pay and you'll have little or even no bill to deal with in January. It saves you interest and handling a lot of cash around Christmas, so in fact is a cheaper way of using it, than the standard approach. So start paying for your Christmas shopping and other expenses now, and once Christmas is over you can start the same approach to pay for your Summer holidays or whatever upcoming expenses you may have.

The Sweeper

Siogfinsceal wrote:

....and you can even get the loan for a littl emore than you owe to tide you over.

This is a DISASTROUS suggestion. If you cannot afford to live on what you earn, either downgrade your lifestyle or get a better job.

Don't EVER add "a little something for me" to the end of a loan. In two years time you'll be cursing the idea from the heavens.

newgrange

Your friend should:
1. Apply for a personal loan for exactly the amount he owes, no more.
2. Cut up the credit card/Do not use it again until 3. has happened.
3. Clear the credit card bill.
4. Rethink his attitude to buying things he cannot afford.

0utshined

MorningStar wrote:

One thing I fear is being in debit and there being no jobs but that is the way I remember things.

Wow, I kinda feel like that too. I don't remember it so well but the 80's weren't the best time for this country. Kids today don't know they're born!

Edit :

Also, this +1

Minesajackdaniels wrote:

This is a DISASTROUS suggestion. If you cannot afford to live on what you earn, either downgrade your lifestyle or get a better job.

Don't EVER add "a little something for me" to the end of a loan. In two years time you'll be cursing the idea from the heavens.

.

Diver79

Well look at all the little Eddy Hobbs.

Fantastic

0utshined

Diver79 wrote:

Well look at all the little Eddy Hobbs.

Fantastic

<pedant>Eddie</pedant>

MorningStar

Diver79 wrote:

Well look at all the little Eddy Hobbs.

Fantastic

Far friom it I have little or no respect for Hobbs after his Rip off show has given idiots information thay don't understand but makes them run around shouting rip off at everything. Consumer spending has dropped dramaticallly in Ireland since his show and Hobbes may have started a recession.
Control over your own money does not require much effort it is actually harder to to get into debit. If you don't have money in your pocket you don't buy things really simple. If you can't handle that why get a CC. If you want to buy online I think AIB do the a short term debit/credit card.

Siogfinsceal

Minesajackdaniels- I do NOT say a little something for me - try to read the post first!!! I said a little something extra. If you owe 8 grand , get a loan for eight and your not gonna be paid til next month you will end up in debt again by the end of the monh as you will end up using the credit card., so if you get the loan for a little more you can use that until you get paid. Since I actually know the people in question I know that this has worked for them and means that they now pay the one payment they owe to the bank straight outta there wages and then live off the rest of their wages. They also avoid paying huge interest fees.

Flukey thats a fab idea!! im going to start doing that - brilliant idea especially since I buy all my crimbo pressies over the net!

Diver79

0utshined wrote:

<pedant>Eddie</pedant>

Excoooose me Eddie!