Continue to 100% pay off debts?

Superhoopza

EssexHebridean said:

Superhoopza said:

EssexHebridean said:

Superhoopza said:

Martico said:

Here's a factsheet from National Debtline on persistent debt

I'm well aware what persistent debt is. Are you aware that minimums these days are above interest charges, therefore if you don't spend on the account, you will end up clearing the balance? 

Most people who post on here are keen to get debt free as soon as they can though, so finding small ways of making the process more efficient can really make an impact. 

Is the suggestion that I am not trying to assist with that?

No - you asked a question, I answered it with an explanation. Simple as that. 

My question was asking Martico whether they were aware that if someone can make minimum payments, with some providers as the minimum is a reasonable amount above their monthly interest payments, they would not be in persistent debt, unless they were continuing to spend on their card. Not with all credit providers though.

You 'answered' my question by talking about process, which is not what I asked. Whilst not doubting making the process more efficient is helpful, it doesn't appear to me that you were answering the question, so not 'Simple as that'. I'd also think it wouldn't need to be pointed out that if someone came on here for advice on their problems, they too would want to be debt free as soon as possible, it also depends on their circumstances and impacts of any options they take on their current and future circumstances.

EssexHebridean

@Superhoopza You'd be surprised what it can help people to point out - we have people arriving here frequently who think that just paying their minimums is the only option they have, for a start. We generally take an approach that there is nothing which "doesn't need to be pointed out" as almost invariably there will be someone who that (seemingly obvious to one person) statement might well come as a bolt from the blue.  It really isn't a one size fits all on timescales either - one person wants to throw every single penny at their debts and get them gone as their prime focus - others want to be able to continue to "live their life a bit" - maintaining an entertainment budget that goes beyond a TV license, and they are willing for things to take a bit longer. It really does entirely depend on what approach suits the individual. 

The more detail and explanation that can be provided on these boards, the more information there is for the next person with a similar situation who is reading threads but hasn't quite got to a place where they are ready to post for themselves yet.  

Superhoopza

EssexHebridean said:

@Superhoopza You'd be surprised what it can help people to point out - we have people arriving here frequently who think that just paying their minimums is the only option they have, for a start. We generally take an approach that there is nothing which "doesn't need to be pointed out" as almost invariably there will be someone who that (seemingly obvious to one person) statement might well come as a bolt from the blue.  It really isn't a one size fits all on timescales either - one person wants to throw every single penny at their debts and get them gone as their prime focus - others want to be able to continue to "live their life a bit" - maintaining an entertainment budget that goes beyond a TV license, and they are willing for things to take a bit longer. It really does entirely depend on what approach suits the individual. 

The more detail and explanation that can be provided on these boards, the more information there is for the next person with a similar situation who is reading threads but hasn't quite got to a place where they are ready to post for themselves yet.  

I completely agree with everything you've said and think it very commendable people try and help others on here. All advice given though should be factual or at least counter points given to give the person being helped all the knowledge possibly to make the best decision for themselves. Sometimes a balanced opinion isn't given not because they want to push the person down a certain road but because they have just missed something or been misinformed. Therefore other people should be able to chip in with further information relating to advice given without fear of others jumping on their back.

RAS

romneym335 hasn't posted here since 28 December? And you are still debating the same point.

In what way does that help them, or anyone else?

They have actually signed in since then, until a fortnight ago.

EssexHebridean

Superhoopza said:

EssexHebridean said:

@Superhoopza You'd be surprised what it can help people to point out - we have people arriving here frequently who think that just paying their minimums is the only option they have, for a start. We generally take an approach that there is nothing which "doesn't need to be pointed out" as almost invariably there will be someone who that (seemingly obvious to one person) statement might well come as a bolt from the blue.  It really isn't a one size fits all on timescales either - one person wants to throw every single penny at their debts and get them gone as their prime focus - others want to be able to continue to "live their life a bit" - maintaining an entertainment budget that goes beyond a TV license, and they are willing for things to take a bit longer. It really does entirely depend on what approach suits the individual. 

The more detail and explanation that can be provided on these boards, the more information there is for the next person with a similar situation who is reading threads but hasn't quite got to a place where they are ready to post for themselves yet.  

I completely agree with everything you've said and think it very commendable people try and help others on here. All advice given though should be factual or at least counter points given to give the person being helped all the knowledge possibly to make the best decision for themselves. Sometimes a balanced opinion isn't given not because they want to push the person down a certain road but because they have just missed something or been misinformed. Therefore other people should be able to chip in with further information relating to advice given without fear of others jumping on their back.

Exactly that - I do understand that it's easy to get a bit defensive if you feel someone is "having a go" - but it's usually best to assume that they aren't, on here, as generally, they really are just trying to help! I completely agree about the importance of the advice being factual as well - that's vital, and it's why we do tend to explain things with process rather than just giving yes/no responses which can come across as a bit brusque and also be more open to misunderstanding. 

Superhoopza

EssexHebridean said:

Superhoopza said:

EssexHebridean said:

@Superhoopza You'd be surprised what it can help people to point out - we have people arriving here frequently who think that just paying their minimums is the only option they have, for a start. We generally take an approach that there is nothing which "doesn't need to be pointed out" as almost invariably there will be someone who that (seemingly obvious to one person) statement might well come as a bolt from the blue.  It really isn't a one size fits all on timescales either - one person wants to throw every single penny at their debts and get them gone as their prime focus - others want to be able to continue to "live their life a bit" - maintaining an entertainment budget that goes beyond a TV license, and they are willing for things to take a bit longer. It really does entirely depend on what approach suits the individual. 

The more detail and explanation that can be provided on these boards, the more information there is for the next person with a similar situation who is reading threads but hasn't quite got to a place where they are ready to post for themselves yet.  

I completely agree with everything you've said and think it very commendable people try and help others on here. All advice given though should be factual or at least counter points given to give the person being helped all the knowledge possibly to make the best decision for themselves. Sometimes a balanced opinion isn't given not because they want to push the person down a certain road but because they have just missed something or been misinformed. Therefore other people should be able to chip in with further information relating to advice given without fear of others jumping on their back.

Exactly that - I do understand that it's easy to get a bit defensive if you feel someone is "having a go" - but it's usually best to assume that they aren't, on here, as generally, they really are just trying to help! I completely agree about the importance of the advice being factual as well - that's vital, and it's why we do tend to explain things with process rather than just giving yes/no responses which can come across as a bit brusque and also be more open to misunderstanding. 

I think we're both on the same page with this. I've seen a few instances where people state outright that paying minimums means persistent debt. Plenty more context is always needed but it seems people are unaware that minimums are a fair bit higher than interest payments these days and therefore, big if but if the card is not continued to be spent on, their balances will reduce. Counter argument is that not all providers have higher minimums and that yes if you can pay more than minimum then fantastic.

RAS said:

romneym335 hasn't posted here since 28 December? And you are still debating the same point.

In what way does that help them, or anyone else?

They have actually signed in since then, until a fortnight ago.

Our posts are about as useful as yours. Actually in this case more, as we're debating how to improve and ensure the communication and advice given to people is correct and with context. Your post was not helpful at all. Glass houses and high horses are aplenty here.

Martico

Balances will reduce, and minimums are higher than interest payments, but paying minimums only can still bring in persistent debt.

Take the example of a starting CC debt of £1,000. Minimum payment is set at 3% of the balance (high on the scale) and interest is 22% (pretty standard for a regular CC)

Month one, you'd pay £30, and attract interest of around £18. And so on. After six months, you'd have paid interest of around £120 and your overall debt would have fallen by around £70. Keep that going for however many months, and you could be classed as in persistent debt, as over time your interest payments exceed the amount by which the debt falls. 

[Edit: It's not the end of the world, and as I understand it warnings would be sent without markers on your file before further action is taken], 

Superhoopza

Martico said:

Balances will reduce, and minimums are higher than interest payments, but paying minimums only can still bring in persistent debt.

Take the example of a starting CC debt of £1,000. Minimum payment is set at 3% of the balance (high on the scale) and interest is 22% (pretty standard for a regular CC)

Month one, you'd pay £30, and attract interest of around £18. And so on. After six months, you'd have paid interest of around £120 and your overall debt would have fallen by around £70. Keep that going for however many months, and you could be classed as in persistent debt, as over time your interest payments exceed the amount by which the debt falls. 

[Edit: It's not the end of the world, and as I understand it warnings would be sent without markers on your file before further action is taken], 

Or simplified, your payment has to be at least double the percentage of your monthly interest, i.e. here monthly interest is 1.8% so your minimum payment needs to be at least 3.6% of the balance.

Just looking at my credit agreements, minimum payments and impact on balances if at 22% (my cards vary, some above, some below):

1: Interest + 2.5% of balance = paying more on balance than in interest
2: Interest + 2.5% of balance = paying more on balance than in interest
3: Interest + 3.5% of balance = paying more on balance than in interest
4: Interest + 1.0% of balance = paying less on balance than in interest
5: Interest + 1.0% of balance = paying less on balance than in interest

To summarise, here 3 of my 5 cards would have more payments made towards their balances than interest paid if minimum was paid. So I'd argue 3% isn't on the high side, that's my point, in the last few years minimums for most providers have gone up to the point where your total minimum payment clears more from your balance than interest is charged, therefore continuing that will (slowly) reduce your balance and not show you as in persistent debt. Yet lots of people say that is not the case, which I find frustrating, as it's not true in a good few cases, definitely not all cases, so can't be used as a blanket statement.

Superhoopza

If it was said that paying minimums leaves a minimum payment market on your file then yes I've found out recently that's true, that wasn't what was said here though.

Anyway food for thought for us all.

BadDebtor

romneym335 said:

For the last 6 months I've been working loads of overtime in order to pay stuff off. I've managed to pay off the remainder of a loan (12k) 2 years early. I now have a 10k credit card left. I estimate this would take me 6-7 months to pay off using all of my left over money after bills etc each month. I have next to no savings at present due to commiting all of my money to paying off debts. 

What's people's thoughts? Pay off the credit card with everything left over or save a bit and use the remainder to pay off the credit card which would obviously take longer.  At present the credit card is interest free till April and I will then try to transfer the balance. 

I commend you for paring down your debt, I don't know if you go any early repayment discount as many loans don't.  

So the first thing to do is to make sure that your £10k of credit card debt is renewed at zero percent, having settled the £12k debt your credit score should be pretty good.  The MSE tips newsletter below will have a 0% deal.

https://www.moneysavingexpert.com/latesttip/

Some of my family members use their 0% Credit Card to fund investments, not very risky because their bonus far exceeds their investment, it is really just a cash flow tactic, they have made money at this for several years.

The way I look at it is if your credit card is interest bearing then paying it off is like getting a savings rate of up to 39.9%.

If you are not offered a zero percent card then end the debt, you can always start paring down the credit card debt now and when it is renewed just use the card for daily transactions and use the cash saved for a decent safe investment.

I paid off more than half a dozen credit cards over and over again, they automatically increased my credit limit which I never asked for, then when circumstances changed I ended up servicing the debt for years before wising up and defaulting it all when I fell off the ladder.