£11k paid to credit card over 4 years but only £300 paid off debt!

Tryingtocleardebt

Yes I was stupid, yes I was young, but I ran up a lot of debt when I was younger (8 years ago) due to being silly, and having an ex leave suddenly and me having to pay all the bills and mortgage on my own etc.

I am now in a position to start paying some off, and last week contacted Halifax to ask about my credit card and the APR (following instruction to pay off the highest APR first), and I was shocked to discover since November 2012 I have been paying £222 a month yet only £5 a month of that went on the debt!
So in all that time I have paid Halifax over £11,000 but only paid £300 off the overall debt!?
How, when people are getting PPI back, account fees etc, can this be fair?

I am looking for advice if there is anything I can do? They have just said it was in the T's and C's when I took out the card but that just doesn't seem fair or even moral.

Please don't comment saying I 'should have known' or 'if I didn't realise I shouldn't of had a credit card'. I KNOW I was stupid in running up the debt, I was young, and don't need to be reminded of that, I just need help.

[Deleted User]

That sounds unlikely. Where have you got your figures from? What is the balance and APR at the moment?

Have you defaulted - are you on an arrangement or payment plan?

ViolaLass

If your interest rate is about 23.5% then it works.

Edit: ignore me. I thought the £11k was the amount owed.

OP, we can't comment without knowing more figures.

Tryingtocleardebt

The amount (embarrassingly) owing is £14,344. The APR is 19.4%.
I have not defaulted nor am I on a payment plan. The £222 is the minimum amount though.

Tryingtocleardebt

I got the info from Halifax. When I complained I just got told it was in the T's and C's, but they would not charge me any interest for the next 3 months! Not really that helpful after what I have paid in...

I even asked them if I paid off say £5k or £10k and paid the min payment, would I still only pay £5 a month off the debt, and they said yes!

Ebe_Scrooge

OK, doing some rough calculations, 19.4% APR on a capital of £14,344 gives roughly £2780 interest a year, which is £232 a month.


I know the figures aren't quite as simple as that, but it's a rough ballpark. So in essence, each month you're paying off the interest for that month, and barely paying anything towards the principal amount. Which is why paying only the minimum is never a good idea.

Money_Rollercoaster

That's the minimum payment trap, in a nutshell. Paying the minimum isn't really designed to get you debt free, it should only really be considered a "keeping the status quo" sort of payment. You've essentially been paying the interest and fees and not eating into the capital.


You really need to investigate options for moving that debt to a cheaper % rate and also looking at your finances to get a budget in place which allows you to make serious progress in paying that debt off. Have you checked your credit file(s) to see how you look or joined the MSE credit club to see your affordability hit-rate score. It might help you work out where to move the debt to. I assume that you don't currently have another credit card offering 0% or lower APR rates for balance transfers (even sufficient to move a portion of the debt)?


There'll be lots of help and advice for you on this forum going forward.

Tryingtocleardebt

Hmm, I thought this would be the case, and only now I've looked into it and done some research I realise that this is the trap. It just seems so unfair, and it was never explained that the min payment would only pay off £5 a month of the debt, otherwise I would have changed it sooner.

The only other question I have, which is why I didn't understand why I only paid off £5 a month on this one, is that I have other credit cards, and what I pay off on them a month pays off at least 30% of the debt, and the APR is the same or higher? These are also min payments.

GDB2222

Tryingtocleardebt wrote: »

I got the info from Halifax. When I complained I just got told it was in the T's and C's, but they would not charge me any interest for the next 3 months! Not really that helpful after what I have paid in...

I even asked them if I paid off say £5k or £10k and paid the min payment, would I still only pay £5 a month off the debt, and they said yes!

That's how they calculate the minimum payment, I expect, ie it's that month's interest plus £5.

So, if you paid off £10k, your minimum payment would drop to around £65. £5 of that would be towards capital, and the rest would be interest.

You'd do better to transfer to a 0% loan.

Tryingtocleardebt

I'm in a fortunate position now where I have my own business and can pay off £10k in one go, and hopefully the rest next month.
With them 'giving me' 3 months interest free I won't add any more interest before it's paid off.

It just seems so unfair that I have paid so much to this company and have nothing to show for it.

Another question, my husband says to pay off the highest APR first but with this situation I want to just get rid of the Halifax card as literally nothing is going off the debt each month.
Would you do the same, or pay off the card with APR of 20.79%, even though £30 a month of the £110 monthly payment is actually paying off the debt?

CKhalvashi

Tryingtocleardebt wrote: »

The amount (embarrassingly) owing is £14,344. The APR is 19.4%.
I have not defaulted nor am I on a payment plan. The £222 is the minimum amount though.

Looks about right.

If you'd upped your payment to £250 a month, you'd be £2047 better off for £1344 of cash, or have around £12300 to pay.

In fact, if you up the payment to £250 a month, it'd be paid in 11 years with interest compounding. Something to seriously consider.