Getting Credit Cards back under control

moatmeister

Following a difficult couple of years of over exposure I am now in a position to start to try to get my debts under control.

I owe about £35k across 7 cards, including some "offer friendly" ones such as barclaycard, BoS, Lloyds, MBNA and Halifax. All pretty much maxed out for the past 12 months, and mostly now on high 25% plus interest rates. I also have £5.5k total overdraft across 3 current accounts, again regularly maxed out. I earn a declared self employed income about £35k/year but pretty much all of it goes on servicing this and other essential living and work costs. There is not much spare!

Its been very difficult but I have been careful not to miss any payments, even if that has meany getting the occaisional credit card cash advance to pay another one. I have had to pay the minimum payment on a particular card then use that available credit to live on until another payment becomes due. Overall my credit history is clean, just over exposed.

When things were better I regularly got balance transfer offers and 0% deals but obviously not recently.

I now have an extra £10k to throw into this and at least another £5k expected next month and would like to use this as effectively as possible to unlock all this and encourage the return of some low or 0% BT offers on the existing cards and to get the overall cost of the interest and bank charges down.

I realise this wont happen overnight but lowering the debt in any form will enable me to chip away at it more effectively out of my monthly salary and that is the priority.

I would jump at the chance of another decent balance transfer card or a low rate loan to assist this process but that wont happen until I have got this lot managed better.

Included in the above is £1700 on a 30% capital one card which i intend to pay off entirely and then use for monthly day to day spending, paying it off in full every month and stopping spending on the others.

Any advice on the best route to deal with this in terms of
a) reducing the overall debt and
b) improving my credit profile
eg should I pay down all the overdrafts or concentrate on the cards etc etc???
The recommendation seems to be to get an overall revolving balance of around 30%. This is not yet attainable so what should my short term goals be? For example I have a £10k barclaycard. I could pay a big lump off this and gamble on getting a low interest BT deal which may not happen?

[Deleted User]

If you post your balance and rates on the cards, we can suggest what the best strategy might be.

moatmeister

Cheers. Here it is. Forgot about the MBNA. Balances all been very high for a bit, but managed to get a few under the balance transfer threshold on the last round of statements. No offers yet forthcoming but it's early days.

1) Barclaycard £9066 out of £10200 (just got it under the 90% BT threshold on last statement) 25.1% compound
2) BoS £1421 out of £1500 26.2% compound
3) Halifax £2890 out of £3260 22.45% compound (just got it under the 95% BT threshold on last statement)
4)Halifax £14808 out of £14989. Includes £12771 @ 0% until 05/19, balance at 22.2% compound
5) Lloyds £4637 out of £5k. Includes £4446 @ 0% until 04/20, balance at 22.44% compound
6) Capitol One £1698 out of £1700. 30.34% compound
7) Santander £918 out of £1000. 18.94% compound
8) MBNA (in Wifey's name with her permission, not financially associated) £11200 out of £11800 Again just got it under the 95% BT threshold last statement. Balance @ 29.9%

Overdrafts:
Barclays £2550 - costs about £90/month - reducing to under £2k saves £45/month
Santander £1600 - costs about £30/month
Nationwide - costs about £15/month

Also: Nationwide 48mnth personal loan £8867 out of £14950, 27mnths to run @ 3.6%, £334.50/mnth

MBNA, Barclays, both Hfx, BoS and Lloyds have all had offers previously
Looking for best use of cash to reduce interest payments by hopefully getting some offers back on the table and then juggling things around in the short term. Will hopefully have extra £700/mnth income from rented property early in the new year too.

[Deleted User]

I'd be tempted to clear the MBNA card. They're generally offer heavy once you're not carrying a balance - although there's no guarantee of when or if the offers will come.

It's also close to being the highest rate debt, so even if you don't get offers, you're saving on the interest. However, it's your wife's card, so you need to think about what the rest of her situation looks like. For example, there would be little point if she's got a history of missed payments elsewhere.

The small Halifax debt could also be an option, even though the rate is lower - again, they send out regular offers, but you only have a small limit on there, so would only be of limited use.

Thrugelmir

With a total debt exceeding £60k. Reliance on future BT's is unlikely to work. The FCA has introduced rules that lenders must follow to assist those in persistant credit card debt. To this end I'd use the available lump sums to clear the overdrafts and highest interest credit card debts.

I'd suggest you speak to the National Debt Helpline for guidance once you've utilised the lump sums. As with minimum payments you are trading water. From your earlier post you were struggling to meet your monthly mortgage repayment. Just needs an unexpected financial crisis and you'll sink totally.

MallyGirl

I would be tempted to clear the interest incurring amounts on the cards where the majority is at 0% - Lloyds less than £200 to do this. Admittedly Halifax is more at £2k so it might not be the most efficient thing to do but it would allow you to be very clear on what is at 0%, and so gets the min payment only, and what needs more targeted action. The tidy freak in me would do this.

Get Barclays OD under the £2k to save £45 pcm and keep it there.
Pay off Capital One and close down after 1 clear month
Rest to wife's MBNA as it is highest APR

moatmeister

Cheers. This was written in reply to ZX before I saw the other helpful posts.... Presume you approve of paying off the cap1 immeadiatly and then using it sparingly? And what about the overdrafts? they must figure in the equation somehow because the balances get reported to the CRAs? Or is that not a major issue because only dealing with existing cards, not new applications?

What would be your second choice after paying MBNA? Whilst wifeys credit rating is i believe reasonable, and I take your point about the interest rate, I would be happier seeing some offer movement there first before sinking all my cash into the MBNA because that would have no overall effect on my credit file. I believe it is potentially better and more easily recoverable than hers which has a few other (time mendable) holes in it so I have greater confidence in it. You make no mention of mention of Barclaycard, traditionally my favourite BT card? Does anyone know the criteria for being offered offers? Any idea how much I would have to pay down to encourage a BT offer? If I could trigger some offers first I had thought about paying half MBNA and half barclays and then transferring the remaining balance of each to the other one

It would be nice to get into a position to be able to deal with at least some of the approx £12k halifax balance when it starts to attract interest next April.

moatmeister

PS I dont want to rely on BT offers but I would like to increase my chance of either of us getting one. And to Mallygirl, I wil need to retain a card to use, thats why I suggested the Cap 1. Its also the one I've had the longest and it has a reasonable limit. I spend a variable large amount on travel and hotels for work each month and wanted to keep a card specifically for that. If you think paying and closing a card will help I would be happy to do that with the £1000 santander one unless there is a benefit to my long term relationship with santander to keep that one instead. Do people still look down on Cap 1 cards or are they more mainstream now?