Help! What to do with my credit card debt?

chris10131121

Hi everybody,

I’m new around these parts so I hope it’s OK to ask for some advice on this forum!

I am struggling with some credit card debt and so thought it would be handy to get some tips. I find it hard to understand comparing interest rates/APRs, and have looked a bit round this site and others but it may make more sense if I spell everything out here for you guys to make some suggestions.

I have two cards, one is an HSBC Mastercard with £2050 debt. The credit limit is £5500 and the statement says the APR is 21.9%. The statement says the interest on cash is 2.004% and the interest on purchases is 1.671%.

The other is a Virgin Mastercard with £3722 debt. The credit limit is £5000 and the statement says the interest is 1.24% on purchases and balance transfers. Annoyingly I can’t find anything about APR on the statement.

I always pay the minimum payments on the card but that tends to be about the same as the interest anyway.

I lost my job in September, luckily I got a new one quite quickly but unfortunately with a lower salary – so I can only ever afford to pay about an extra £100 to the cards on top of the minimum payment, before getting close to my overdraft.
I have tried applying for a new 0% balance transfer card twice but have been declined – I’m worried about applying for more in case I damage my credit rating permanently. I’ve checked my credit rating with the 3 different agencies, and it doesn’t seem to have any major problems, but I guess I may have a bad credit score because I have moved house a few times in the last few years and have changed credit card a couple of times too. I also have a monthly direct debit of about £40 for a new laptop I had to buy last year when my old one died in the middle of applying for new jobs!

What would you guys recommend?

Should I move some of the debt from one card to the other? Should I try and get some kind of loan to pay off both cards?

Any help would be really useful, as I seem to be getting nowhere, and if I carry on like this it will take decades to pay them off!

Thanks!

RichyRich

Hi Chris

Welcome to MSE. Of course it's okay to ask for advice. Many people's first threads on the forum were asking for help, many of whom are now established members who chose to stick around afterwards. MSE's generally a friendly place to hang out.

Whilst I understand wny you chose to put your thread in this forum (Credit Cards), I'd suggest it might be an idea to post in Debt Free Wannabee instead, where people may be more well versed in your predicament. Perhaps a board guide could move it over if they get chance?

I'm afraid your dilemma is not my area of knowledge, so will wish you good luck and hope you get sorted soon. I'm sure someone who can help will be along soon.

All the best
Rich

chris10131121

Thanks Rich that sounds sensible!

Chris

RichyRich

Just to add, the interest rate on your Virgin MasterCard is much less than that on your HSBC Credit Card. Even if you cannot get new credit elsewhere you will be paying less if you transfer the HSBC debt to your Virgin MasterCard (provided that your credit limit is high enough). If it's not high enough, you should focus your repayment efforts on your HSBC Card first, making only the minimum payment on your Virgin card until the HSBC one is paid off.

Martin's article, the Credit Card Shuffle, might explain this better.

chris10131121

Thanks for that tip.
Should I repost this on the other forum?

kevinn1234

Step 1. Get a scissors.

- Kevin

izools

chris10131121 wrote: »

The other is a Virgin Mastercard with £3722 debt. The credit limit is £5000 and the statement says the interest is 1.24% on purchases and balance transfers. Annoyingly I can’t find anything about APR on the statement.

This works out to an APR of 15.9%.

Virgin may offer a special rate if you transfer your balance from your HSBC card, they often do. If not, still cheaper if others have said.

Then cut up the card, close the HSBC account, and if you ever get a letter from Virgin about a change of interest rate (upward) call them and state you are "opting out".

Good luck!

chris10131121

Sadly I don't have enough credit limit to transfer the whole HSBC balance over, and they have declined to extend it. So I will still have some to pay off at HSBC

izools

You can atleast shift what you can, making the most of your ability to save interest.

You can also ask HSBC and Virgin to "Close" the accounts, which prevents you from spending on the account (taking away temptation) and also freezes the APR as it is preventing them from increasing the interest rate in future (Virgin / MBNA are notorious for doing this, sometimes upto 34.9%)

If your bank can offer you a competitive APR on a loan (never hurts to ask!) to repay the cards it would be cheaper for sure, just make sure to cancel the accounts as soon as they've been paid off to prevent the possibility of getting yourself into a worse position than you are now

chris10131121

Thanks izools - sorry for being a bit clueless, but what would you suggest is a competitive APR for a loan? My bank is HSBC.

RichyRich

chris10131121 wrote:

Thanks izools - sorry for being a bit clueless, but what would you suggest is a competitive APR for a loan? My bank is HSBC.

According to Moneyfacts, the most competitive unsecured personal loan of £6,000 over 3 years (as an example) is at a typical APR of 8.9% (including first direct, which is part of HSBC).