Using balance-transfer cards to help put an end to our debt troubles

ChrisLV

So, I know that there's a metric ton of personal-finance wisdom on these forums, and I'd like to ask for some of it! Here's my situation:

The Background

My wife and I have been living in the south for many years, piling up debts (credit cards and short-term loans). Some of it is bad money management on our part (OK, a lot of it is), but some is just the expense of living in the south. In any case, in our mid-forties, we find ourselves with a high household income (about £94k), but unable to afford the deposit for own house and living every month trying to avoid finishing with our bank account in the red. A big portion of our income goes on credit card and loan repayments and interest. Especially interest. :mad:

The Plan: Phase 1

So, a couple of months ago, we both got jobs up north to put an end to our financial woes by escaping to a region with a more manageable cost of living. We knew that in the short term, this would leave us even worse off, and boy, it sure is.

We're temporarily paying double rent (well, rent + hotel) because I'm up north, and the wife and little one are still down south until the end of the school year: wife is a school teacher and the little guy's in school. This has caused my credit card debt to get even worse (I'm at about £11.5k on my cards now).

We'll finally have the family moved up north by the end of July and go back to paying a single (and way lower) rent. But before then, my credit cards are still going to have to take some more strain: £1k for the move, another £1k for the deposit and about £700 for first month's rent, plus £5k for a second car.

I know it might sound crazy to be looking at a second car in our situation, but repayments + insurance + maintenance + petrol works out to be about the same price as the train for commuting, and the second car allows us to live in a lower-rent area than if we had to live in an area within easy train-commuting distance of Manchester, where I work. [Note: we can't escape the commute because my wife's job is about 35 miles away from Manchester].

So by the time all this spending finishes, I'll probably be at £19k credit card debt, or perhaps £14k + a new £5k loan taken out for the car (by my wife).

The Plan: Phase 2

Come August, when we've paid for the move and are no longer paying double rent, it's finally time to start getting rid of all this expensive short-term debt. It might be over-ambitious, but we want to be debt-free, ready to start saving for a deposit and buy our own house, within 3 years. A big part of my plan is transferring as much as possible of my current credit card debt to low-fee balance-transfer cards, then setting up monthly payments to pay them off before the deal ends (about 3 years for most of the cards I can get). I'm guessing I'll need two balance-transfer cards to accomplish this.

Can you give me advice?

I'm looking for advice generally--any tips on making this work and/or changing the plan so that it will work better. But I'm also interested in some specific advice on balance-transfer cards. Is it better for me to apply for my first balance transfer card now, while our monthly outgoings are crazy, or after we move, when they'll have gone way down but we're at a new address? Also, I'm worried that when I get my balance transfer cards, the credit limit won't be high enough to transfer a big chunk of my £14-19k credit card debt. Any advice on how to reduce the chances of that happening or to deal with it if it does?

Some more details on our personal circumstances:

When I look at my credit report, I have a good credit rating (972 on Experian), but weak affordability for loans and so-so affordability for credit cards. We also have a history of moving around (we've left all our rental properties over the last decade within 1.5-3 years). I've got a low-interest £25k loan and my wife has a smaller one of around £7k. She's got a bit of credit card debt, but not much. My credit card debt is spread over two cards.

MallyGirl

I think you might struggle to get good BT cards - new job, new address, electoral role will not match address.

You are thinking £19k on CC plus a £25k loan already. There isn't much headroom for further borrowing.

Penelopa.Pitstop

Wife can apply for 0% transfer card, maybe she will be more successful. And then you can transfer debt to this new card.

mark55man

maybe apply now from your old address would be slightly better

plus when the dust has settled you and OH need to make sure the added complexity in your arrangemnts doesn't lead to new debt creeping in elsewhere - something I have been a past master of, in a similar sort of position to yourself

you should consider reading some of the debt free diaries to help get into the mindset for a long (even 3 years is long) road to get DF. maybe even starting one

..."Moving up North to get my debt down South" ...

I'd subscribe

Good luck with your challenge

ChrisLV

Update:

Thanks for the advice so far all.

I decided to combine the advice of mark88man and Penelopa.Pitstop.

I applied for a Virgin BT card...waited really anxiously while the application was assessed...and got it for the whole £11.6k of my current credit card debt. Phewph!

There will still be another £7.5k or so of credit card debt racked up before we finish Phase 1 of the plan, but we'll apply for a BT card for my wife as well, which will hopefully accommodate that.

mark55man

You've solved half the CC the interest problem (at a cost), with a good joint effort from you OH you should solve the other half soon enough - Yay

Then you get all the costs but you are fully aware of that

Then - you must not forget them. I know you have made a serious decision to achieve financial freedom and all that, but debt on a 0% CC can be invisible.

and being frugal as a hobby is living a life of denial but half heartedly and hence ineffectively. You need to be frugal as a lifestyle and that can be dull. so you need to get over the excitement of the move, stay away of the bright lights of the Northern powerhouse and just knuckle down

there's plenty you can do for free or not very much - and you just go to get with that

you seem determined enough - you just need to accept its a long old drag, but with your combined incomes you will be amazed how quickly it all comes off

mark55man

we have combined income much the same but mid 50s with kids all over 20 now so have a residue of commitments mortgage and family mainly UNI - we have been paying back £10K a year - so with more determination and less commitments you could really monster this. Part of my lack of hunger is significant equity in the house and knowing we will downsize in due course so no need to be as aggressive as you, but conversely I don't think for you 3 years is undoable - hard work, yes; impossible - no!!

So the mark88man mantra of advice would be
* Use the move to establish thrifty habits such as sandwiches or salad at work
* use the old style board on here to get a sense of just how cheap you can life (but you need to find a workable balance)
* don't fix your loans and BT cards with day to day spending
* if you get bored and fall off the wagon and do something stupid then deep breath get back on the wagon and no regrets
* although you will need to be careful to keep costs of the change down the one off costs aren't as important to debt busting as making constant small improvements in terms of spending or earning tens of pounds every month
* finally don't regard your previous spending as the norm that you are drawing in from (as you will always revert) you need to find a new baseline that is sustainable and affordable and will see you debt dwindle and then your SAVINGS increase

Who knows you may be MF before me