Wife Confesses £10,000 CC debt, help please.

splishsplash

shocked wrote: »

[/list]In the same order.....

We have a joint current account that both salaries go in to, and we have a joint mortgage.

She has been paying "the minimum", she says, the statements do not have APR written anywhere, but I have posted the %s I do see in the post above. They are not defaulted, just at the limit from what I can see.

If I can transfer the whole lot to a zero percent I suppose that would make sense.

What has the money been spent on? Beats me, all I can get out of her right now is "clothes" and nights out. However, she has not had much of either from what I can see so goodness only knows. I'll get to the bottom of that and steps will be taken to address the spending, but it is clearing £10,000 now that is on my mind.

Until I heard of this CC debacle, the only loan we have is the mortgage, I do not believe in spending money I don't have so even though I am 40, I have never had a credit card. How ironic is this.

Thanks for the quick replies. There will be lots of advice to come, and every bit of information helps, so well done so far!
If I were you, I would feel encouraged by the fact that it's not an astronomical amount of debt (contrary to what you may think!), so you can definitely work on it, especially in view of your otherwise good money management.
I would start by getting both of your credit reports. Given that your wife has used all her available credit, and that your credit history may be short (in view of you not having had loans or credit cards, and savings don't register on your report), it would be worth ensuring all other factors that may have a bearing on your credit score are tidied up before applying for 0% or low LOB cards anywhere. See the Step-by-Step Guides at the top of the page, and have a read of the Credit Rating page - lots of useful information and insight to be gained there.
The 0% cards work on the premise that you're going to breathe a big sigh of relief to realise you're not paying a big slice of interest every month, that you'll get lulled into a false sense of complacency by having just moved rather than sorted the problem, and that you (or, in this case, your wife) will fall back into the spending habits that made the balance transfer necessary in the first place... only by then, they'll be charging you interest, and your debt will be increasing... clever, eh?!
This is also why it's really not going to be enough just to cut up the cards and pay off the debt - if your wife can't identify how and why she spent it, and how she could justify it to herself for two years, then there is a very real possibility that she will continue her debt spiral. Harsh, but true.
Once you're happy that the credit reports are ok, then go ahead and apply for one, or at most two, either 0% or low LOB cards. The advantage of the 0% is that interest won't be accumulating over the terms of the card - usually 12 months. The low Life of Balance option means that no matter how long it takes to clear the debt, the interest rates won't increase beyond the low introductory offer - as long as you don't increase the debt further...
If you get the cards you want, and do a balance transfer of the debt onto them, the next step is to get your wife to cut up all cards and vow never to use them again!!! (Actually, that should be done now - before doing anything else!)
Then you can re-work your monthly budget to free up a large chunk of money to start reducing the balance owed. That's where your SOA will prove invaluable, and posting it on here will get you masses of advice on how best to do that.
What all this means is that the debt won't be cleared immediately, but it will be cleared efficiently and fairly quickly, and without wiping out all you've worked so hard for over the years.
That could be important, as if this debt isn't cleared, and if your wife continues to run up more debt, there may come a time when further credit is denied to you both. Unfortunately, because of the joint account and mortgage, you are both financially associated, and that can have ramifications for your credit report... which is why I asked those questions, and asked you not to react hastily...
So why not sleep on it for now, and tomorrow start afresh by getting all your figures together for your SOA, and phone the cc companies to find the APRs. You just ring them up and ask.
Hang in there, you will get through this, and you have lots of support and help on here.

Merlot

You have to weigh up whether you will be losing alot of interest on your life savings?

I think Mrs Shocked should pay this back, I have a feeling that if you gave up YOUR life savings as you put it, she wouldn't get to forget that in a long time. Please do not hold this against her, she will feel terrible just now and from your paragraph above, I'm not sure you have calmed down yet? The kids do not need to know about this and they will probably not suffer, kids need our time, not money, not going out, just our time and that's free, and please remember no-one has die, its only money, and we all do foolish things at some point.

shocked_2

@ Splishsplash.

Thanks, I will do a credit rating check at joincreditexpert.com and cancel it before the DD kicks in as suggested above. If it comes back good, then I guess that makes the 0% bal transfer an option at least.

splishsplash

Good for you! Now get some sleep! You'll cope much better tomorrow if you do! This is not the end of the world, and you will sort it between you. Take care, both of you, I wish you the best. Goodnight.

GeorgeUK

Hi shocked

Glad to see you're standing by your wife instead of "going off on one". You will get plenty of good advice here, so please don't hesitate to ask any questions, no matter how basic you may think it may be.

I would ask though what your wife has said with regards paying off the debt. Has she just told you about it and left it at that, or are you both talking about the best way of dealing with it? I would try to get her as involved as possible in every part of this so that she can deal with it and hopefully learn from her mistake. I would imagine a large chunk of that debt is just pure interest and not her actual spending, but you need to be certain that she won't fall back into the habit of using the plastic.

The 0% interest option i would probably go with as well (because i'm cheap ) but you need to be aware that this is only a promotional thing that the banks do to entice you to join them. What most people here do though is open another 0% interest account with another bank a few months before the promotion ends and transfer the remaining balance. You would need to see how long you think it would take you to pay off the cards if they were 0% and if you think you would be able to get new cards for that long and for the amount required. From some of my earlier posts, you could see that i was in a similar situation and took out 2 cards to cover the cost. Paying roughly what i had been paying monthly it would take just over 2 years for me to get rid of the debt (probably less now though for me).

I worked out the APR's for you from here:
http://www.stoozing.com/mon2yr.htm

Assuming she hasn't taken cash out with the CC and just bought items with it:
Card1 : £1,778 @ 27.9% APR
Card2 : £5,718 @ 17.95% APR
Card3 : £1,255 @ 19.95% APR

Monthly payments on this @ 3% (usually the highest minimum monthly payment) would be
1778 * 0.03 = 53.34
5718 * 0.03 = 171.54
1255 * 0.03 = 37.65
Total monthly payment : £262.53

The monthly interest would be
1778 * 0.02075 = 36.90
5718 * 0.01385 = 79.20
1255 * 0.01527 = 19.17
Total monthly interest £135.27 so you are only paying off £127.26

Have a look at the snowball calculator here: http://www.whatsthecost.com/snowball.aspx

For your current debt without doing anything, and making the 3% monthly payments (but only £262.53 per month), it would take 48 months to pay off the cards and you would be paying £3,695 in interest. (If you paid the most to the card with the highest APR)

At 0% you could pay off the debt in 34 months. The only "interest" would be the BT fee - which would be about 1 months payment for the entire year (usually no more than 3%)

There are other cards you may want to look at if you do not want to try to keep changing banks every few years, like a Life of Balance (LOB) card which has a much smaller APR (between 5%-8%) with of course a Balance Transfer fee.

The limit you will be offered on a CC will depend on your salary, credit rating and also current debt. As you have a shared liability (with the missus) this may affect your credit rating, but also as you have not had credit before - you have no credit history so this may also have an adverse effect on your credit score.

I would advise approaching on of the MBNA banks (definately not RBS) as they seem to give a higher limit in general. When doing the Balance transfers, you need to also be aware of who the card issuer is as they do not allow BT's from cards in their own "group". Natwest card is issued by RBS so you would not be able to do a BT between those 2. This link should keep you straight, but i think that is the only one you want to avoid. LPF i think is Littlewoods Personal Finance.
http://www.stoozing.com/cards.htm

And last, phew, don't just start phoning up all the banks asking for a card. The number of credit checks on your file can influence your credit score so alot of credit checks close together will flag up to banks that you are asking alot of comapnies for credit and may not be a good risk. Usually no more than 3 within a 6 month period before your score gets affected. I got 2 in the same week which didn't quite cover the amount i wanted, but this is when you could use part of your savings to pay anything that you can't cover with a 0% or LOB card.

Note: There is no way to find out how much credit a provider may be willing to give until you ask for it. Each time you ask for credit, a credit check is made against your file. It may be wisest to start asking at a bank you are already a customer of as you will have at least some history with them.

Hope some of this is of use and doesn't confuse you too much.
Feel free to ask any questions.

George

shocked_2

Thanks for that info George.

We did a credit check and the full extent of the debt is as follows

Barclaycard 1787 TESCO PERSONAL FINANCE 1255 LITTLEWOODS FLEXIBLE ACCOUNT 197 LITTLEWOODS Mail order 59 IKANO FINANCIAL SERVICES (new look) 193 NEXT DIRECTORY 835 NATIONWIDE VISA 5736 ACE 100
Totalling £10,162

I ran a credit check and her score is "excellent" 999/1000, hardly surprising considering this is the exact type of person CC companies love.

Unfortunately Barclays is in that list so I won't be able to use the barclays 0% transfer deal. I guess I just look around for other cards that will do 0%..?

For the 4 debtors listed that are below £200 each, I was thinking of just clearing those using savings to get them out of the way, and trying to get the rest transferred to 0% somewhere to give us time to clear the debt without interest piling up...?

Thanks again.

GeorgeUK

Sorry - should have said. Try USWITCH to compare the cards and their offers. Change the dropdown box to look at balance transfer deals. Virgin look quite good and is one of the MBNA cards.

Clearing those small amounts is probably the best idea. Just make sure the wife is up to speed on everything and what you suggest to clear the debt. After being in debt for so long and worrying about it, it would probably do her good to feel that she is in control and dealing with things.

climbgirl

shocked wrote: »

If I got a Barclaycard Platinum CC at 0% interest on balance transfers for 14 months from account opening (2.5% handling fee applies), and put £5,000 balance debt in it (the max they allow) how much is the minimum monthly payment they would accept on that?

Thanks for all advice.

I think you're on the right track looking at 0% deals that could cut down on the interest. Just one more point - you've mentioned the minimum monthly payments a couple of times. You'll need to start looking at your household budget to see how much money you can free up to throw at this debt. Any cut-backs on luxuries you can make, things like that.

If you just pay the minimum on these debts each month, it will take you decades to pay off (read Martin's articles on this topic, it'll shock you!). You need to start looking at freeing up money from your budget to clear more than the minimum each month.

immoral_angeluk

ianian99 wrote: »

spend your life savings on baling her out and she'll probably just do it again!!!

Completely agree.... bailing her out doesn't take the issue of why she got into that much debt in the first place and that needs to be looked at first before you go paying anything off for her.

shocked_2

Until a few years ago, I used to do a forecast/expenditure every month. I fired up that spreadsheet and did an average month's money flow and although there are some figures that change every month, it looks like there is a £700 surplus every month.

That means two thing, firstly not only has she been spending money we don't have thanks to CC companies, but she's also been frittering away a rather large monthly surplus. My fault for not keeping track of things.

On the other hand it looks like we'll have easily upwards of £500 even on a bad month to put towards the debt. Does that change anything, or stick to the transfer plan?

Thanks again, your advice is invaluable right now.