A friend in debt with 5 credit cards - Help !!!

Forever_Red

Today I have spoken to a friend of mine at work and she has told me that she is in quite a bit of debt using various credit cards. I told her that there was a way out of it and that I would seek some possible answers, so here goes.....

She owes approx £21,500 on the following cards,

Tesco - £8000
Sainsburys - £4000
RBS - £2500
Barclaycard - £1500
Skycard - £1000
Selfridges (store card) - £4500

She pays the minimum required each month, which is approx £800 - £900, but has missed a couple of payments in the past. She has also been turned down for an Egg credit card this year (I think).

I have told her that she could reduce the debt by transfering the debt to a low interest credit card and NEVER using that card for purchases, but still paying the £800 - £900 off the card and not just the minimum amount.

Now, I have no idea which credit card company would accept her, how much she could transfer to the new card or how you even go about doing this. That is why I am posting this dilemma in the hope that someone can give her some guidence, rather than me just assuming that it is easy to sort out.

All answers appreciated :grouphug:

Alan

:xmassign:

Mozette

Well, she could try for a 0% or low LOB rate, but she'd be lucky to get that much of a credit limit. Still, whatever she could shift to a lower rate would help. Also no harm in asking her current cards for a lower rate.

arfster

Depends on her credit record and income I guess - but it's quite possible a lot of providers will refuse a new card, especially given the missed payments. Try the smart search for 0% BT cards here:

http://www.moneysupermarket.com/cards/credit_card.asp

It's not exactly what the CC companies use, but it's powered by Equifax so won't be far off. Doesn't leave any mention on the credit file either.

Doesn't help she already has a Barclaycard, they're not quite so picky. You have to check who runs these cards as you can't transfer from the same operator's other cards - eg the Cheshire aren't that picky either, and have a 0% for a year option, but they're MBNA.

If she can just shift a chunk of the card debt to 0%, the money going to interest now can be used instead to reduce the debt owed. She mustn't go applying for lots of cards though as it'll hurt her score, so the search above should be useful to know who might accept. Once she knows how much a CC provider will do, shift the high APR debt first - I imagine that's the Selfridges card at 30% APR or something equally ridiculous.

If 0% cards aren't possible, a low interest loan is probably the next best option.

CLAPTON

she needs to consider the reasons for her debt..shifting it around won't solve the probem.
suggest she posts on the debt freewanabe board

GeorgeUK

Also get her to check her credit history at experian (free).
Better that she is fully aware of how many late payments and credit checks are on her account.

The CC companies will also look at how much credit she has used as well as her income. I think if she isn't earning more than £25k, she could be struggling.

Get her to look at the limits on the cards as well. You usually pay off the highest APR first, but if she can pay off one of the cards that she hasn't had a late payment on, after a few weeks of it being clear she may be offerred and incentive to keep it open instead of closing the account.

Get her to look at the snowball calculator http://www.whatsthecost.com/snowball.aspx

arfster

CLAPTON wrote: »

she needs to consider the reasons for her debt..shifting it around won't solve the probem.
suggest she posts on the debt freewanabe board

Sure, should have mentioned that. However, she's paying out 10k a year in minimum payments at present - first order of business has to be reducing that as much as possible, then using the newly freed up cash to reduce the debt.

0% deals have a bad name, but if used properly they can save a fortune.

thedriver

also address the cards with the highest rates first of all.

Store cards tend to charge at 29%

CLAPTON

arfster wrote: »

Sure, should have mentioned that. However, she's paying out 10k a year in minimum payments at present - first order of business has to be reducing that as much as possible, then using the newly freed up cash to reduce the debt.

0% deals have a bad name, but if used properly they can save a fortune.

Sadly many people with debt problems see their problem simply in terms of the debt and not in terms of why they are in debt and of their spending. So think that just shifting the debt around is the solution (consolidations etc).

Without knowing the persons overall financial circumstances its impossible to say where to start.
In any event, if her income is modest with debts of 21k she is unlikely to get low APR cards.
Also low APR cards often dont actually reduce her monthly outgoings so may not address the immediate cash flow crisis... who can say without the details.

Much better to post an SOA on the DFW board.

Forever_Red

Thanks to everyone for their replies. Now I am trying to get her to list her state of affairs on the DFW board.
Maybe she will or maybe she won't, but at least she has started to see that it is a big problem.

Thanks again,

Alan