Card debts - best approach?

moff_2

Hi,
I'm helping my girlfriend out with addressing her card debts.
Here's where they're at:
Description....................Debt......Monthly...APR.....Limit
.........................................Payment................
Virgin card....................7574......89........18.....15700
Egg card.......................5232......104.......21.9....5420
Barclaycard....................3678......70.......25.9.....4000
Dorothy perkins store..........1094......45........29.9.....1400
Debenhams store card............939......40........28.......1000

Egg Loan.......................5030......260.......7.66....n/a
Student Loan...................4003......140.......4.8.....n/a

She also has a current account with £3000 overdraft limit, paying £11.50 p/m for the facility plus interest on it which is ~£17 per month (not sure what the % is). Generally she'll be right up to the £3000 at the end of each month before pay-day.

Her situation is that she's currently making the minimum repayments, and will hopefully soon be in a position to pay a bit more into actually clearing them.

Her credit file shows these (plus previous large, but settled) debts, with no missed or late payments, no CCJs etc.

From what I've read here and elsewhere, I'm suggesting she does this:
1) Cut up the two store cards, Barclaycard and Egg card. Keep the Virgin card for emergencies (car broke down at 3am in the morning type emergencies)
2) Transfer the balance of the two store cards and the Barclaycard onto the Virgin card
3) Apply for a long-term cheap card, as suggested here and transfer as much as possible onto it. I've no idea whether she'd get accepted for a new card - are card companies going to see her as very profitable given her current position, or as too much of a risk? I am aware of the inadvisability of making multiple applications if one fails.

After this, obviously make the minimum repayments on all cards, but concentrate on paying off the remaining cards in order of highest APR.
The Egg Loan is fixed amount per month and a lot less APR than the cards. The student loan is bottom of the list of concerns.

How does this sound to folk? I'm a bit cautious giving this advice as it's big sums of money and I've no experience with finance except managing my own money.
I'm also wary of "gotchas" with balance transfers that may mean the advice isn't so good. For example, I'm aware that the card companies are devious when it comes to a spend on a balance-transferred card and taking your payments on the BT and not spend so you accrue interest -- but I'm sure there must be other things to be aware of.

Many TIA :beer:,

moff.

ajaney

Hello & a warm MSE welcome to you!

Your girlfriend is one lucky lady, having you helping her out!

Some of the more experienced members will be along soon with fabulous advice.

What is usually suggested is to post a SOA or statement of affairs so we can see the incomings/outgoings & what is left to throw at the debts.

A special calculator is useful to work out how to prioritise the debts - I believe this is the site http://www.makesenseofcards.com/btcalc.html (other members - please correct me if I am wrong!)

Hope this helps - stick around & watch the help come rolling in!

ajaney x

moff_2

Hi ajaney,
Thanks for your welcome, and your reply.
That BT calc link looks useful, I'll take a look at it.
In terms of an SOA, she'll basically be putting whatever she earns into clearing the debts. I realise it could be a long process, but I'm interested in making sure it's as short as possible through paying the least interest

Cheers, moff.

sparky0107

Hiya moff,
Welcome to the forum, ajaney is right, your girlfriend is lucky to have you. Just need to ask though, has she had her lightbulb moment?, or are you going to have to help her again later on. She needs to get on the DFW wagon, and stay on.
Sorry to be so stark with you

moff_2

Hi Sparky,
Yes, I'd say she has definitely had her lightbulb moment.

cheers, moff.

RAS

Moff

she'll basically be putting whatever she earns into clearing the debts

Hi what is she going to use for living? Are you paying? Even if you are you would benefit from putting together and SOA and having a look at your income and expenditure. There is a lot that can be done to bring in extra money, cut costs and live more efficently on less.

One option is on here http://www.makesenseofcards.com/

moff_2

Hi,

Yes we'll be living off my income. I've done a SOA and will be able to support us both, including meeting her minimum repayments if necessary whilst she finds a job.

I'd still like people's input into my suggested approach (see the three points in my original post), am I proposing anything daft/naive?

cheers, moff.

moff_2

*bump*

anyone?

thepinkladez_2

hey moff,

just wanted to say welcome and WOW your girlfriend is very lucky to have such a great boyfriend! You seem to be very supportive and resourseful!

As a response to your q's you seem to have most things figured out, and are aware of most of the catches etc that lure so many!

I can only suggest the following:

Whichever card you keep as emergencies make sure you get the credit limit reduced to something small £100 -£500 something that could be paid withing 1 or 2 pay packets once your girlfriend has a job. Just incase the card was used for not such an emergency then it can be paid off quickly. i have done this and its worked quite well for me! i have fallen off the wagon and gone a bit mad but this was curbed pretty quick as i only have a tiny limit!

Egg sometimes will convert a card debt into a loan debt, this should be a smaller apr so maybe you could see if this is applicable first?Not sure if they would as your girlfriend already has a loan but worth asking if they can add this in or can have 2?
Its hard to say whether she would be accepted for a low rate card, guess with the current market it might not happen? Maybe you could try and if not then forget that option, like you are aware too many applications will not fair well on her credit file.

SunderlandBlackCat

I totally agree with cutting up the store cards but the Barclaycard & Egg card have useful features that might come in handy once they've been paid off so it might be worth reconsidering cutting those up. Maybe put them in a bag/tub of water then freeze them so they can't be easily used but can still be thawed in an emergency or once they've been cleared.

Barclayard do a Life of Balance Transfer deal for existing customers & Egg do a 0% transfer deal every year on the cards anniversary. The Egg card can also be used as a "mule" between balance transfer cards & loan accounts etc.

The Virgin card can be a mule as well but because it's currently on the lowest APR it should be the last card you start clearing if you snowball properly.

thepinkladez_2

good points about the additional features! and i second the freezing thing, it really does work!