(Stupid question?) Is a 6.5% Credit Card better than a 19.94% EAR Lloyds OD?

GeorgeRob

MallyGirl wrote: »

You can't make Experian add anything. Some companies supply info to the credit agencies and some don't - that is out of your hands. Car insurance is not something that helps, some phone contracts do and some don't.

Thanks Mallygirl. We'll forget the car insurance then!

You can ask the agencies to add things that you think are missing though. I had an Experian and an Equifax account, and spoke to them both at length regarding this. You can send an email or letter reporting that something is not present on your file, and they will look into it and add it if they agree. I did it for things on my own files.

Voyager2002

YorkshireBoy wrote: »

What's more worrying is that because she's maxed out again EVERY month, that says she only has "£25-30" a month spare IN THIS WORLD! She spends everything else she gets!

So what's more important is that she addresses the reasons for the overdraft existing in the first place...and that will mean earning more and/or spending less.

In which connection, it is slightly disturbing that she is not here asking the question herself and taking some responsibility for her situation.

Cornucopia

0% on purchases - means you can spend each month and accumulate debt without paying interest on it. You still have to make the minimum payments, though.

The benefit is that you can divert funds temporarily to tackle the OD, whilst not paying interest as the debt "moves" to the CC.

It requires discipline and an understanding of the figures to avoid getting overwhelmed, though. If your GF is always overdrawn she may not be a good candidate for this.

YorkshireBoy

GeorgeRob wrote: »

You can send an email or letter reporting that something is not present on your file, and they will look into it and add it if they agree.

The CRA will only store/report data the lenders submit. Experian et al cannot 'make', say, Vodafone report her mobile phone contract.


Which "things" on your file did you raise issues on?

Foxy-Stoat_3

You need to buy fuel, food every month, not clothes/shoes or 50inch LED TV's.

So buy the monthly things using the 0% interest card and keep the cash in the bank. This will only reduce the interest on the overdraft not the fees so a little pointless as the fees will be way more than the interest.

If the card has a 0% interest on purchases for say 12 months and you spend £200 a month on food and fuel then in 8 months you could of transferred all of the overdraft onto the 0% interest spending card. So you will have another 4 months of interest fee debt which will give you enough time to find another card.

Obviously this can go the other way if some thing unexpected happens and you need to spend on something big which will land you in even more debt so really the overdraft limit needs to be reduced every month so you can't actually rack up more debt.

As stated, if your GF has no money at the end of the month, IE not chipping away at the overdraft at all then she cannot afford ANY more debt.

YorkshireBoy

Cornucopia wrote: »

0% on purchases - means you can spend each month and accumulate debt without paying interest on it. You still have to make the minimum payments, though.

The benefit is that you can divert funds temporarily to tackle the OD, whilst not paying interest as the debt "moves" to the CC.

This method doesn't work as well when their are fixed fees though, ie £6 per month or £1 per day such as with Halifax, Santander, et al.


Better to transfer the O/D in one go in my opinion...if she can!?

It requires discipline...

100% agree. On the evidence so far it appears that may be a concern?

GeorgeRob

Cornucopia wrote: »

The minimum payment is set by the bank, and is typically 3-5% of the outstanding amount to which the current month's interest has already been added. Based on the £1500 outstanding, a 5% minimum payment will be around £75, 3% would be around £45. Obviously, those payment include both interest and an amount towards paying off the capital.

So the minimum payment on this 6.5% card, or a 0% card would be around £45 - £75? That seems steep doesn't it? I'm sure last time (and only time) I had a credit card from Lloyds (3 or 4 years ago) my minimum payment was about £30. Mind you most of that was interest I think, as it was not a good card!

MallyGirl

not sure where those figures come from - most of my cards require 1% or £25 minimum, whichever is the greater. My post office card requires 2% so getting rid of that next month as I didn't spot that in the T&Cs when I signed up.

Voyager2002

GeorgeRob wrote: »

So the minimum payment on this 6.5% card, or a 0% card would be around £45 - £75? That seems steep doesn't it? I'm sure last time (and only time) I had a credit card from Lloyds (3 or 4 years ago) my minimum payment was about £30. Mind you most of that was interest I think, as it was not a good card!

Yes: the law has changed so that people are in effect forced to pay off credit card debt at a reasonable rate, reducing the total amount of interest that they end up paying.

YorkshireBoy

GeorgeRob wrote: »

So the minimum payment on this 6.5% card...would be around £45 - £75?

It's £25. See post #10.

To give you the full picture it's the greater of £25 or 1% plus interest. That means they'll only use the 1% plus interest calculation on balances greater than £2.5K