That 'C' word

betterlatethannever

I hope this doesn't sound silly, but i had a huge panic today.
My daughter (shes 18) got sent her first CC today with a £450 limit, along with a letter from her bank saying she had a £400 pound OD limit. :eek:
She been with me through much of the recent hell i've been through, and i know i can't stop her, and i have to let her make her own mistakes, but this has left me feeling sick and panicky.
Do i sit her down and have the big 'credit' discussion? do i just leave her too it and hope she's learnt from my experiences? should i encourage her to use it a little to get a credit rating and also learn that the money has to be paid back and will leave her short in weeks to come?
Ohh god this is horrid. She only earns £130 a week (plus gets frequent, though unreliable overtime). The bank (one of my biggest creditors) didn't even ask to see her wage slips, they just took her word for it.:mad:
I really want to take the card off her and cut it up, but should i?????

Richard_S

Good question bltn,

We had a similar experience last year and I honestly believe they do learn from their parents mistakes.:eek: :eek:

Fortunately we share the same initials and I was able to use the card to hire a car when we were on holiday but she demanded a cash bond before we left and charged us the APR +10% for any outstanding balance.

I thinks she's learned an invaluable lesson; credit cards are an essential part of 21st Century life, use them judiciously and don't trust anybody; even your parents.:D

RAS

BLTN

it depends on your DS. We spent our early years in quite comfortable circumstances, although not "rich", then everything went pear-shaped and we lived on or below the poverty line for the next decade.

I hardly knew how to spend my student grant because I had never had so much money in my life and lived nicely off 80% of it. In holidays, I contributed 30% of my income to the household, despite my mothers attempts to stop me (I would buy things that she needed or buy stuff to make up huge batch of food for the freezer).

When I found myself on benefits, it was hard but I survived. I will never forget going to a week in hand interview and being given a claim form for the bus fare. I filled in the cost of the fare home. The caseworker asked about the fare to the interview. I explained that I had walked, 8 miles, because I did not have the money to pay the fare, in fact I could not afford a pint of milk. She added it to the form which meant that I could make a meal that night. Actually I walked half way back as well, so I could eat for two days.

DS had a more difficult relationship with money, which we both recognise had its roots in having her pocket money savings stolen when she was six. I just spent mine, but she saved at least half every week. She paid her keep when she was earning in the holidays and worked when she took a year out. After Uni, she realised that having a bank manager who increased your OD was expensive and spent a while clearing her debts. Her OH is really good with money and he used to say "You would like a,b,c,d,e,f,g,..x. We can afford a,f,h,or t this month, which do you want to buy?

DB never had a brass farthing, never contributed to the household income and not infrequently took money that was not his when he lost his job again. He can always spot an opportunity to get money, but he has some high cost hobbies. he does not like living on a low income and he is the only one not to have bought a house.

The thing is theoretically the same background, but even the few years between us and our personalities led us to react very differently to the situation.

The same goes for the next generation; we have one who cant keep money in his pocket and one who only loans the car parking fee if she gets an IOU, with a steep interest rate added if it is not refunded tomorrow.

Your DD is much older than we were, so she may well have a visceral reaction and an intellectual one. She will have to make her own way but you can help her by pointing her to some of the things that you wish you had known about earlier.

For instance, show her the snowball and how to calculate how much money costs to borrow at different APRs. Show her martin's article on paying back the minimum. Talk to her about making some sort of contribution to the household if you think that is appropriate? And explain what you have had to learn about budgetting so that she can sort one out for herself. And if she wants to go on holiday, ask her how she is going to save and even suggest she reads up on ISAs. But make sure that she knows that you trust her to make the right decisions and will love her if she does not..

Young people have to learn financial competence somewhere and they do not get taught it at school, so where else are they to learn it but at home?

betterlatethannever

What a brilliantly written piece RAS.
Your correct, i need to help her see where i went wrong. She's heard so much about MSE (i've tended to refer to it in conversation a lot recently)!, but has never actually looked at it.
She does contibute to the household; approx one third of her income. Its a lot compared to many of her friends, but its the only way we can survive.
I'll get her to look at ISAs as well.
Thanks for the replies.

MissMuppet

When I was 18 (just turned 18 as well) my boyfriend at the time got sent to prison for unpaid fines... being the naive 18 year old I was and pressure from his Mum at the time I went to my bank and got a loan of £2,000 to bail him out!! I went to Canterbury all on my own carrying it in cash and handed it all over to the prison so he could come home for Christmas. The next day when my Mum found out what had happened she actually went into my bank and had a right go at them for lending me the money knowing full well what I was using it for.

I know it's not the same but even when I was old enough to get credit my Mum was still furious and made sure they knew about it.

I think the limits on your daughters card and OD are manageable, if they are increased then that's when I would start to worry I think. Hope you don't stress too much about it...

rog2

EXCELLENT post from RAS.

I have to say that credit cards were not really the main issue, in my bankruptcy - yes I did have credit cards (HSBC Visa, Barclaycard, Capital One and the dreaded MBNA) but they ONLY really became a problem towards what was probably an inevitable conclusion to my situation.
I had had two of my cards for over 20 years, and used them mainly for business, paying off everything at the end of the month, whenever possible, to avoid charges.
The Capial One and MBNA cards were, relatively, new additions to my 'arsenal' having acquired them in the five years before bankruptcy.
Yes, in the two years before bankruptcy, when I was trying to keep my business going, I started to use (particularly the last two) cards for the 'credit' and was paying minimum repayments. MBNA increased my credit limit four times in the space of six months, and Capital One weren't much different - mind you I needed the increases to keep pace with their charges and interest.
End result - at bankruptcy I owed NOTHING to HSBC Visa, less than £500 to Barclaycard, yet £3,000 to MBNA and £4,000 to Capital One.
Currently I have a 'Cashcard plus' Pre-pay Mastercard, and an Italian pre-pay Visa Electron.
I MAY, one day, and for the reasons outlined by Richard above, apply for a 'mainstream' credit card - from one of the High Street Banks - but will only use it as a 'debit' card, i.e. full repayment at end of month, and only in those circumstances where my pre-pay cards are not acceptable.
As far as MBNA and Capial One are concerned, I firmly believe that niether of these companies have any ethics whatsoever - they openly advocate further debt, through increased credit limits, as a 'solution' to debt, when what they are, effectively, doing is creating invisible debt, through disproportianate charging and high interest rates. In the last year, before bankruptcy, whilst I spent NOTHING on my MBNA card and paid the minimum monthly payments, my balance rose by over £1k.
In saying that, and thank you for letting me have a 'mini-rant' about MBNA and Capital One, BOTH of my daughters have credit cards, as does my son.
My Eldest Daughter, and my Son, have managed their finances admirably, and use their credit cards wisely - 'stooging' and always making payments over the minimum.
Youngest Daughter - well, she's just finished university - I know, judging by the postmarks on the 'private & confidential' letters that arrive here, and the phone calls, asking to speak with her on a 'personal matter' at 9 pm on a Friday, and 10 am on a Sunday, that she's struggling. But she's just got her first job, and, with her sister's help, is confronting her debts.
I guess that we're all different. I certainly hope that my children will have learnt a lesson from what has happened to me, and I fully accept that I am in NO position to dictate how they choose to manage their finances.

RAS

rog2 wrote: »

I fully accept that I am in NO position to dictate how they choose to manage their finances.

Rog

Based on you posts here, I do not think that you would dictate how they choose to manage their finances, whether you were a highly successful business magnate or BK.

I also think that there is a lot that your children and others can learn from your experience if you are able to talk to them about it. Not preaching or dictating but providing them with information about the warning signs, procedures and the impact.

Note my father never talk about what happened either regarding the finances or the family breakdown, except through lawyers. And the finances was only one aspect of the family situation which is still so delicate that I have to be careful what I say to a number of relatives.

I can just about talk to DS, and it has helped her to be able to say "Do you think what happened when I was six affected my attitude to saving". Yes, yes, yes. She also understands my need to have something "to fall back on".

Personally, I find the bits below useful in understanding the symptoms of potential "meltdown". Based on these boards and the experiences of friends during the late 80s/early 90s, I think people who advise about consumer issues are not fully alert to the issues facing sole traders and small businesses. I knew people who went to the wall just because a big customer had gone belly up and some lost their houses as well, because they had secured loans against them.

So, rog, bltn and everyone, hold your heads up and explain when it is appropriate, as you have a lot to offer in an area that is often shrouded in mystery. And before you think my comment a bit steep,think of some of the myths with which first posters arrive.

rog2 wrote: »

I have to say that credit cards ONLY really became a problem towards what was probably an inevitable conclusion to my situation.

Yes, in the two years before bankruptcy, when I was trying to keep my business going, I started to use (particularly the last two) cards for the 'credit' and was paying minimum repayments. MBNA increased my credit limit four times in the space of six months, and Capital One weren't much different - mind you I needed the increases to keep pace with their charges and interest.
End result - at bankruptcy I owed NOTHING to HSBC Visa, less than £500 to Barclaycard, yet £3,000 to MBNA and £4,000 to Capital One.

As far as MBNA and Capial One are concerned, I firmly believe that niether of these companies have any ethics whatsoever - they openly advocate further debt, through increased credit limits, as a 'solution' to debt, when what they are, effectively, doing is creating invisible debt, through disproportianate charging and high interest rates. In the last year, before bankruptcy, whilst I spent NOTHING on my MBNA card and paid the minimum monthly payments, my balance rose by over £1k.

RAS

rog2 wrote: »

at bankruptcy I owed £3,000 to MBNA and £4,000 to Capital One.

Rog

Did you pick up on this post by dragonlady

I am betting MBNA doesn't have an Agreement for you. if you PM me it will be easier to explain.

We have found none of the MBNA agreements conform with the Act.

RAS

fiveyearplan

I pm'd dragonlady for more information but she never got back to me. We owe MBNA £17,000+ and is one of our biggest creditors. We actually got our MBNA cards in the Ryan Air queue at Stansted Airport. DH got £7,000 limit and I got £2,000. This is despite us both earning the same amount. His limit quickly rose to £10 and mine to £4. Yes, of course we happily accepted the raised limit but we never asked for it. It is irresponsible lending.

wherediditallgo

What an excellent post, RAS, & well done BLTN for thinking ahead about how to handle this situation with your daughter. I'm going to be in a similar position in about a year with my nephew, who's always been far too generous for his own good & who I can see being taken advantage of now he's started going out in the evenings with his friends. He'll be off to TAFE sometime next year, working part-time, & I'm already worried about what he'll be doing with the extra money & additional 'friends' to spend it. His mother is worse than I was with managing money & he knows it, & she thought that as his aunt he'd take advice better from me than her.

I think we have to tread a very fine line between advising of what can happen & assuming that they won't be able to deal with the situation if it arises. I've already spoken to my nephew about budgeting for what he needs, so he's very used to saving part of his money towards what he wants. I'm going to encourage him to put 10% into long-term savings, 10% into short-term savings, & then look at his monthly expenses & work out a budget he can live with for the remaining 80%. He'll still be living at home, so he won't have some of the bills that others will have, but he'll still be prone to the offers of credit cards, loans etc. I don't want to be saying "Do this, don't do that", but I also don't want him to end up where I did because of having no advice either. It is a worry, that's for sure.

betterlatethannever

Thanks for all the replies to this.
Although generally sensible, my daughter has gone 'without' in a lot of areas for so many years (due to my crap budgeting etc) and i now worry that she'll go mad and get all the things she's always wanted/needed.
A lot of my daughters friends are from well off families and they have everything. She's going to feel pressured to keep up with them. I wouldn't mind if the credit card companies kept the credit limit at what it is now, but i know that within 3 months they'll up it and up it again.....(then again. most of us can say that)!!!
WDIAG what a lovely auntie you are to be so concerned and to have taken the time to speak to and advise your nephew.
I suppose the one advantage i have is that if she starts to get in trouble i know where to go for help.....but my main panic is that if she starts to get into trouble i can't help her out, or, if she gets into trouble and feels that because of all the warnings from me, she can't approach me.