Persistent debt repayment plan or balance transfer?

memphis73

Hello all

I have a question relating to persistent debt.

We have in total £16k of credit card debt approx, incurred due to IVF and a new house. I work freelance, so hard to plan & budget.

We don’t use any of the three cards that have this debt, we’re just paying them off at a little more than minimum repayment

With the FCA rulings about persistent debt, 2 of 3 card providers - Barclaycard and Nationwide have said That unless we make a sizeable payment we will enter persistent debt repayment plan.

This would mean ending the cards ability to draw on or purchase with which is fine by us as we don’t use them. Instead they will propose a repayment plan, and barclaycard ihdicated this will be at a beneficial interest rate composters to the current 20% approx.

While both have said this will not my affect our credit ratings (cards in my name not my wife’s but invariably we’re linked) I am concerned that this may yet affect my attempt to get into repayment and future credit ratings

Changes come into affect in February. Should I be looking to balance transfer instead? But my credit rating I’m sure won’t get long life of card or optimum rate.

Just want to try and pay down some debt but feel like all I’m doing is paying the interest. And never have enough to pay more than the min.

Sorry, depressing AF!

foxy-stoat

memphis73 wrote: »

Just want to try and pay down some debt but feel like all I’m doing is paying the interest. And never have enough to pay more than the min.

Sorry, depressing AF!

Standard minimum repayment amount for barclaycard is 1% plus any fees and interest. Standard interest rate is about 18%. No way you should be making the minimum payments as the debt will never end. Its a way to force you to repay it earlier than paying high interest for the next 10+ years.

Look at it this way, would you take out a loan for 10 years at 18% interest apr... though not.

Try and get another card and balance transfer and make the highest monthly payments you can. Dont forget to cancel the barclaycard, or at least reduce the credit limit so you wont run up debt again.

the_big_al

Hello,
I've been paying minimum payment with Capital One for quite a while now.  The FCA are forcing Credit Card companies to stop customers being in what they term 'persistent debt'.   I don't think the companies would have done anything differenty if this FCA mandate had not come about. The companies  obviously make more profit if people are paying high interest rates for long periods..

Some people, because of certain circumstances, have to pay the min amount and may not be able to get loans/balance transfers to improve the situation.

Capital One have sent me a letter with two new 'payment plans', nothing really new in them, they just ask you to pay more per month and this reduces the time that you have to pay them back, no reduction in terest rate but obviously overall interest will be less as you're paying them back over a shorter period. One big difference is that they suspend the card until everything is paid back.   I told them that I can't afford to increase my monthly payments from the minimum currently possible so they came up with another plan for which I asked them to send me the details. They said they would but they didn't so i phoned them again and they said they can't send the details as their processes don't allow this. They said I could accept this plan via phone, they would then send details and then i could opt out of it if i didn't like the terms.

 This third plan is to increse the payments to reduce debt, still have use of the card but not to withdraw money or make balance transfers and 3 percent, of purchaces that the card is used for will be added to the min payment amount from then on.  

The only other option is to not take up their plans and if none is in place by the date specified (early next month) then the current min payment option will stay but card will be 'suspended' for good. I have no axe to grind on this but thought this might be of interest to others.  

Hope this isn't too boring as it's my first post.