Moneywise?

Sazzie23

Found on a website called Moneywise today

'One in five (19%) credit card customers made only the minimum payment in October, while 5% made no payment at all, new research has found.

The Debt Advisory Centre (DAC) said that the "concerning" figures were worrying as its research was carried out before the traditionally expensive Christmas period when people are more likely to spend on their credit card.

It found that 18- to 24-year-olds struggled the most to pay their credit card bills, with 26% only managing to meet the minimum payment in October and 13% admitting they missed it completely, leaving them paying more in interest and in charges.

A customer paying the minimum payment off a £2,500 balance on a typical credit card with an APR of 18.9% will take more than 25 years to clear the debt, the AOC said, and pay more than £3,000 in interest too.

Customers that fail to make the minimum payment will usually be charged a penalty - typically £12 – and any missed payments will also show up on the customer's credit history, potentially making it more difficult for them to obtain credit in the future.

However, the DAC also found that 49% of cardholders did pay off their balance in full each month, while 19% said they paid off more than the minimum payment but less than the full balance.'

Just wondered where DMPers fit in these stats - many of us make a payment but not a full one??

And just a word of advice, if you are recognising yourself here as in the 20% of strugglers, take action now - don't wait until its critical.

sourcrates

That's why the whole system is corrupt.
When I was 18, I was targeted by credit card companies, loan companies, banks, all offering me financial products, credit cards, loans etc.
That's how my own debt struggle started.


You see they may bleat on about how important it is to keep within your limit, and not to miss a payment, but in reality, they WANT you to do this, as you will make them more money that way.
They actually hate customers that pay on time, especially those who pay off there balance every month, as those customers don't make any profit for the bank.


In the past, when default charges were around the £35.00 mark, I read an article about Barclaycard, this was around 2002/2003, and in 2001, 44% of BC total profit for that year was made from default credit card charges.
Obviously that figure will have fallen now somewhat, but it does go to show the real agenda here.


Of course no one will openly admit profiteering from people the least able to afford it, but that is what happened, nowadays with new FCA rules on treating customers fairly, they have had to tone down there actions somewhat, but, with all the posts on this forum about BC not stopping interest and charges for customers entering DMP`s, it seems its still hard for the leopard to change his spots.

MrWillyWonka

I believe finance/life courses should be compulsory at schools, particularly in Year 11 & college before they turn 18 and eligible for credit.

And perhaps all credit cards should come with automatic membership to this forum and a minimum of 50 posts is required before approval? We can only dream!

Sazzie23

Hi Sourcrates

Wow - thats really depressing, but it explains why they suck you in and then bite you when your back is turned.

& Mr WW but when the government encourages you to take loans (student debt) is there ever going to be any respite ??

iolanthe07

Credit cards are a useful and convenient way of paying for stuff with an added bonus of air miles and points, but you do have to pay them off in full each month, otherwise you get shafted.

sourcrates

iolanthe07 wrote: »

Credit cards are a useful and convenient way of paying for stuff with an added bonus of air miles and points, but you do have to pay them off in full each month, otherwise you get shafted.

That's a good point, but people, even with the best intentions, often forget this advise, pretty quick as well.
Card companies, target the young, get them hooked at an early age, and they have a customer for life, a bit like the cigarette people used to do with there disgusting product.


A limit increase here, special low rate there, its all to easy to spend way beyond your means, and lets face it, not many folk stick to one credit card, I was advising a guy earlier today, he was asking :


"how many credit cards is normal ?"


He has 4, all low limits, for now, but that will soon change.


People rarely stick to just one card account, most have several, and here in lies the problem, if you can afford to service numerous credit cards, then fair do`s, but lots cant, and they end up just paying minimums, and missing two meals a day, in order to pay the piper.
I am not a fan of credit card companies, they say they do "affordability" checks, but I think they lie.


Of course many people manage there credit ok, but I don't agree with giving the younger generation Hugh credit limits, and numerous card accounts, when there working 16 hours a week at Tesco.

Sazzie23

I think its alot more complex than young people being given high limits.

I agree in principle a credit card or loan should be a good thing. What happened in my reality was that I couldn't afford to buy X (say a tv or new tyres or something) so I paid for it in the CC and then I couldn't afford the car insurance so I paid for it in the CC and then I had these 2 extra repayments to make and for the most time that was Ok and then - Hey a holiday - everyone has one - I'll pay for it on the CC and then I have another repayment, so now there is 3 extra or increased payments. Continue this cycle over many years, and continue to fail to budget and finally some major event means I can no longer service the minimum payments.

I don't blame anyone other than myself and I will repay it all, but I wish someone had explained to me this cycle alot earlier.

In reality the credit crunch did me a favour as I suspect in previous times I would have been allowed to continue to get credit I would never be able to pay off. At least this way, one day, I have freedom.