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

GeorgeRob

YorkshireBoy wrote: »

I thought I recognised the problem...


https://forums.moneysavingexpert.com/discussion/4919816


Loads of advice given 3 months ago when you posted the same question. It seems you had an option to transfer the debt to a card in your own name.


Have you/she really done nothing about it since?It's not a "cheap holiday" when it's costing her 19.94% more than it should do!


You're not exactly helping her are you? Maybe you should both forego the holiday and let her focus on her debt?

Yes I did try to get the ball rolling on this a few months ago. And whilst it was a similar question, this current thread was intended to simply answer my question about whether a 6.5% card was comparable to a 19.94% OD - but as the thread has gone on it has developed into the same territory.

As for your comment "You're not exactly helping her are you?" - that's rather unfair mate. You've no idea how much I have done to help her have you? What do you think I'm doing now for example? Am I doing this for me? I've also put together her budget for her, I've helped her to plan to pay off other things, and she is much more financially aware and responsible now.

As for our holiday, we haven't been away anywhere for 3 years now, and this mere 5 days away in Poland is actually cheaper than when we went to St Ives (from Manchester) a couple of years back. We're staying in a £15 a night hostel, and the return flights were only £80 each. Plus we only need £250 spending money each. So when saved up over a year, it's not exactly breaking the bank. Plus I bought her flight for her birthday. It was more romantic than paying off some of her overdraft.

So thanks for the advice, but no thanks for the judgement.

Foxy-Stoat_3

GeorgeRob wrote: »

it's not exactly breaking the bank.

Agreed, but then £30 a month is also not breaking the bank.

If she is saving £30 a month to go towards a holiday and nothing off the £1.5K overdraft then once she stops paying for the holiday she can start to chip away at the overdraft, assuming she doesn't overspend as there will be credit available. At £30 a month plus charges it will take over 4 years to pay off and if you add up the charges then it will definitely be breaking the bank.

Address the debt when she is ready to and keep paying the monthly fee.

YorkshireBoy

OK, yes it will be cheaper to move the debt to a 6.5% APR credit card (fee-free), just like it would be cheaper to move the debt to a 0% card (4% fee), just like it was back in March when you last asked. So, question answered...but it doesn't really help her long term does it? There's an underlying issue which hasn't yet been resolved.


My posts (and those of others) are meant to give you (and her) a reality check, rather than pass judgement. Sometimes the truth hurts!

GeorgeRob

Foxy-Stoat wrote: »

Agreed, but then £30 a month is also not breaking the bank.

If she is saving £30 a month to go towards a holiday and nothing off the £1.5K overdraft then once she stops paying for the holiday she can start to chip away at the overdraft, assuming she doesn't overspend as there will be credit available. At £30 a month plus charges it will take over 4 years to pay off and if you add up the charges then it will definitely be breaking the bank.

Address the debt when she is ready to and keep paying the monthly fee.

This is exactly the plan. Once we've had the holiday in August, all the saving she's been doing will go to reducing the debt instead. I think she can reduce her OD by £50 increments, so that's the plan.

GeorgeRob

YorkshireBoy wrote: »

OK, yes it will be cheaper to move the debt to a 6.5% APR credit card (fee-free), just like it would be cheaper to move the debt to a 0% card (4% fee), just like it was back in March when you last asked. So, question answered...but it doesn't really help her long term does it? There's an underlying issue which hasn't yet been resolved.


My posts (and those of others) are meant to give you (and her) a reality check, rather than pass judgement. Sometimes the truth hurts!

Yes, but the issue is that her credit file is not strong enough to get either a 0% card, or as it turns out, this 6.5% card. This is why nothing has been done about it. We did look at me getting one in my name, but we decided against it. I only had a 60% chance of getting the 0% card as it was.

The underlying issue is simply that being on just £12k, she does not have any disposable income. She hardly ever buys clothes now, we never go to the cinema, we hardly go out. She insists on paying exactly half for all of our household bills as she is proud and doesn't want me to subsudise her. She has no other debts whatsoever, and neither do I. So this £1500 OD she has left over from when she was a student is our only debt, and we're looking at the best ways to clear it - which is why I am here asking for your advice.

Whilst I greatly appreciate the advice, I don't wish to be tarred with the "irresponsible spender" brush - and whilst I realise many of the people are on this forum because they are, or have been, and you would probably assume that I am because of the questions I have asked - I do not need a reality check. I appreciate the thought though, thank you!

bsms1147

Post a SOA. If you're tackling it as a joint debt, then post a joint SOA.

GeorgeRob

bsms1147 wrote: »

Post a SOA. If you're tackling it as a joint debt, then post a joint SOA.

Thanks. What is a SOA exactly? Statement Of Accounts perhaps? What does this enable us to do?

We're not tackling it as a joint debt at the moment, but we could do - if this SOA would help us get a 0% card then we could use it and then she could simply pay me back my half of the payments.. assuming I'm on the right track here with what a SOA is?

Tixy

It is a statement of affairs, basically a list of income, outgoings before debts, list of debts and debt repayments.
It is something often recommended when people seek advice on the debt free wannabe section as it helps them see their financial position in a clear table, and if posted on the forum regulars will help suggest possible changes, such as looking for cheaper suppliers/reducing outgoings in some areas, moving debt around etc, all to help get free of debt quicker.

This is the calculator recommended on the DFW section - http://www.stoozing.com/calculator/soa.php

GeorgeRob

Thank you Tixy! I see. Maybe we shall do just that!

GeorgeRob

After considering all options, I think this is the plan:

Once holiday is done, start paying off £50 a month on the OD.

At same time, get a 0% spending card which she just uses for petrol, paying it straight back from her bank account, or setting up a DD for it.

This way she is reducing the debt, and building a credit history. Then hopefully after 6 months the debt will be £300 less, and she might be able to get a 0% balance transfer card to transfer the remaining £1200 on to. Then she can pay £50 a month off that instead of the OD, and won't have to pay Lloyds any fees at all.

Thanks for everyone's help.