If I Default on Credit Card Will my Overdraft Be Cancelled? - Scotland.

debtslave2024

I currently am living off a very small income, after it was slashed due to post pandemic business difficulties. I have been warned this income could be cut completely, in coming months.

I have tried to find another job, with over 100 applications, but am finding it increasingly difficult in 2025 to even find things that I think I can do (I am in my 50s.)

I am close to defaulting on one credit card imminently after paying them £30 per month for some time (below minimal payment.) I am about £215 in arrears on that card, and have 3 other cards with similar problems (though default not quite so imminent.)

I am very worried given my employment prospects, and increasing probability of income being cut totally, that if I default on my credit card, my bank (different lender,) will pull my overdraft of £2000 (I am not in negative territory just yet.)

Is this a possibility? Thanks.

Grumpelstiltskin

No the overdraft will not be cancelled if you default on a credit card, BUT the bank can withdraw the overdraft at any time without giving a reason.

If you can't afford to pay unsecured debts then stop paying them. You must concentrate on mortgage / rent, utilities / council tax.

Have you tried to claim any benefits if you have a small income?

debtslave2024

Thanks GrumpelStiltskin. Last time I looked into universal credit, I was due something like £89 a month. However, my mind is now sharply focused on seeking new employment. If I lose my employment, I could barely survive on the benefits, they offer these days.

elsien

Surely £89 a month is better than nothing while you carry on jobhunting?

debtslave2024

@elsien Everything is up in the air at the moment, given the way things are going I may actually be looking at the “generous” £89 a week unemployment benefit, before I could even get my £89 a month universal credit processed (I believe it takes around 5 weeks.) 

One of my main sources of income have just hinted that they will highly likely cease paying me within weeks. I have texted them tonight, to ask if this can be negotiated.

Bronvahl

debtslave2024 said: Thanks GrumpelStiltskin. Last time I looked into universal credit, I was due something like £89 a month. However, my mind is now sharply focused on seeking new employment. If I lose my employment, I could barely survive on the benefits, they offer these days.

I am no expert but a quick look on .Gov suggests the monthly rates are
Single 25 or over     £393.45     £400.14
with the second figure being from April 25 to Mar 26
https://www.gov.uk/government/publications/benefit-and-pension-rates-2025-to-2026/benefit-and-pension-rates-2025-to-2026#universal-credit-uc-monthly-rates
Paying below the minimum payment may have hindered your chance transfer the balance at zero percent (see latest tip newsletter)
https://www.moneysavingexpert.com/latesttip/
If you have to remortgage at some point then it is worth keeping your credit record in good condition, if it is already paid off then unless you need credit for a car then I don't think a credit record matters.
If you will still need to remortgage you may find it reduces you chances of getting a decent interest rate.  If you have equity then downsizing may be an option, but if you rent in private accommodation then moving might be tricky, however, the renters rights bill will make things a bit more stable.  If you are in social housing then so much the better, just keep your rent paid.
In your 50's you probably have a wealth of experience, you might have been worn down by zero hours contracts and other such vile things, it is better to be self employed, at least you benefit from the risk/reward aspect.
You can ask your credit card for a payment holiday if credit is important to you or you can just dump unsecured debt as Grumpelstiltskin suggests.
Two people who live close to me are on Universal Credit but they are self employed, one is a carpenter while the other is a decorator, the carpenter gets some sort of cash in hand for finishing a job quickly.  These two are both dysfunctional with drugs and alcohol but somehow they get by.
Apparently Universal Credit is being scrapped.
I think you UC might give you access to some retraining, it might be a positive new chapter in your life,  It is all about aiming somewhere, otherwise without a destination and a paddle you will go around and around in circles.
You can also volunteer to give yourself a reason to go out every day and keep the routine working.
That experience and attitude to work will be just what some employers want, a bit of gumption and loyalty.  There are many self employed jobs, I have seen people train up for electrics, gas and energy performance.  It really depends on what you are used to and what you want to do.

debtslave2024

@Bronvahl It was actually a debt management company that calculated the low amount of of UC I was due, dependent I kept my meagre earned income from employment. I have very little knowledge of how the benefits system works. All I do “think” I know is that UC is assessed based on your current earnings, and work hours, and full unemployment benefit is around £90 per week?

My mortgage is paid off, I live in a modest 1 bedroom apartment. I have a car that is coming to the end of its lifespan, though it recently passed its MOT. 

It is all very scary how circumstances and the world can change so fast! I was living a modest, yet stable life up until the pandemic hit.

I will need to keep all options open. I like your other ideas - I can no longer keep going round in circles.

elsien

Universal credit is assessed based on your earnings each month. So as your earnings go down your universal credit would increase. it’s not a fixed amount. in that respect it might be better to reply while you have a little entitlement then it can increase if you need it to and you will already be on the system. You may then also qualify for other support such as council tax benefit. They are online benefits calculators such as entitledto or turn2us which you can use to check for yourself.

If by full employment benefit you mean Jobseeker’s Allowance, you would probably top that up with universal credit anyway if you didn’t have much in the way of savings.

Bronvahl

debtslave2024 said:

Thanks GrumpelStiltskin. Last time I looked into universal credit, I was due something like £89 a month. However, my mind is now sharply focused on seeking new employment. If I lose my employment, I could barely survive on the benefits, they offer these days.

debtslave2024 said:

@Bronvahl It was actually a debt management company that calculated the low amount of of UC I was due, dependent I kept my meagre earned income from employment. I have very little knowledge of how the benefits system works. All I do “think” I know is that UC is assessed based on your current earnings, and work hours, and full unemployment benefit is around £90 per week?

My mortgage is paid off, I live in a modest 1 bedroom apartment. I have a car that is coming to the end of its lifespan, though it recently passed its MOT. 

It is all very scary how circumstances and the world can change so fast! I was living a modest, yet stable life up until the pandemic hit.

I will need to keep all options open. I like your other ideas - I can no longer keep going round in circles.

I see the error, it was that you said per month not per week in the post I was replying to.

You have actually achieved a lot because you own your own home.

One can get by without a car, I am driving mine until it packs up, it is expensive to run, expensive to tax and expensive to repair.  I have been saving to get my next car without finance, but I will inevitably have the same problem.  I bought my current car for £3k, within a month I had to put a new transmission in it and although it is running it has some potentially expensive repairs likely.  As long as my garage can keep repairs affordable then I will keep sinking money into it but I am seriously thinking about a second hand hybrid, maybe one just off a lease.

I know about scary and it is going to happen to a whole lot more people, but at a younger age.

I think you need to start by listing on your own paper all the skills you have.

Then think about what you enjoy doing, think tasks not job

Then look online at free Psychometric Tests, the most famous is Myers Briggs, you need to do these honestly if you want an honest report that helps you.

In one company I was in we used a piece of software that did this but it also used our colleagues to assess us, it then suggested for example that the bosses PA would be better suited to the accounts dept, he paid for her to get qualified and she was amazing, she eventually became FD.

These days the internet is a great leveller, you can put up a website for peanuts and you can even get the content written by AI.  I just renewed my web hosting I think it was a little over £100 for four years.  It can support 100 websites/domains  each with email and catch-all.

You don't need an office, you may not even need staff because you can outsource the work you get until you are big enough to take on costs.  Most entrepreneurs start their business while they are employed by others, they have a job that has an early start and early finish.

For example, some years ago  I met a Romanian guy who came to fix my sink, he said I was his last job of the day, it was 15:30!  I explained to him how he could create a website for emergency plumping work and how he could charge a lot more than usual rates but set himself below the rip off rates of those who pay for Google Ads to be first in listing.  He did not need much help, he called me a few times asking for how to get over an issue but he is doing well now.  He has actually employed a general manager because he hates admin and managing people, he likes the plumbing work and last I spoke to him he employed 12 plumbers.

I am sure the JC will know of courses that you can do to formalise your skills or train you for a new career, one where you can be self employed and in charge of your own destiny.  There are also charities that may help you, checkout Turn2Us website, also speak to your GP to see if there is any social prescribing service they may signpost you to.

What you DON'T want is to get into the zero hours contract trap, these are a form of modern day slavery in my opinion.

As for your credit card, beg steal and borrow from friends and family to repair the repayment damage then move it to zero percent (if you can) and use all of your disposable income to tackle it with a goal to have it paid off before the zero percent expires.  Worst case scenario is you have to rinse n repeat to another card in 32 months but I think one go may do it. 

Then it comes down to saving like mad, start with an SOA so we can see where your money is going and advise how to cut back

https://www.lemonfool.co.uk/financecalculators/soa.php

.

Personally I rarely buy anything, I get stuff from Freecycle if I need something

My outgoings are as low as possible, I pay for my energy as I use it, have an overdraft that I don't use, I have savings for car, I don't pay for internet, I don't have TVL or have paid subscription services. I don't gamble, drink or smoke, no drugs except those prescribed (which I get free), I pay my water twice a year.  My general rule is to assume everything is a mortgage if it has a monthly payment.  I pay about £4 a month for SIM but I am about to switch that to 80p, I have a second sim which I got free for a year, so that will also move to 80p a month for 9 months.

I have had a shitload of debt but it has all become statute barred, you could just stop paying your CC and they would sell it for between 3% and 6% to a debt aggregator who will assign it to debt collectors who you just ignore, if they don't get a CCJ within 6 years the debt becomes beyond enforcement.  Meanwhile they will make you all kinds of offers at up to 60%, when it is almost at 6 years they have been known to offer 90% off.

In your situation I would not recommend that route because it is just one debt you mentioned and it may affect your ability to get help with your business.

Note that when I say self employed I don't mean the tax status, I recommend you form a limited company (£80 or free via some banks) and then pay yourself in dividends.  When you put your own money in you can create issued share capital or setup a loan from you to the company.  An accountant will explain all these things or you can check online.

There is a great feeling of freedom in having your own business although for some it can be very stressful because you now have to pay the mortgages of all your employees.  That is why you start small, outsource and wait until the business can afford outgoings.

It is never too late and there may be opportunities you had never thought of, some may require you invest in yourself but for some tasks you might just realise that you are not cut out to be an accountant or solicitor, so you employ the services of those qualified which gives you more time to earn.

debtslave2024

@Bronvahl, thanks for another in depth post. I have learned today after asking to negotiate things, that my income will most probably be terminated. It looks like I will indeed default on credit card debt, and am probably heading towards “benefits land.” I will also add that given my extensive job search some months ago, I reckon that my chances of being employed by others before the economy started to contract was 1 to 3% based on number of applications made. Now after the budget, I am struggling to even find things that I reckon I can do.

As for zero hour contracts, yes, have done them, and they should be banned (as other countries have already done.)

Today, I am just trying to compose myself. As you said, at least I have managed to pay my mortgage off!

By the way what is a CCJ? I am imagining a court order? This is my biggest fear.

RAS

CCJ - County Court Judgement, but the debt world is slow. And until the debt defaults there is no way they can even think about. Not that DCAs computers have much brain. 

Once defaulted, you can set up a small payment if you prefer, or ignore until they send a Letter Before Action. At which point action is required.