Barclaycard PD question

greenbeenz

Hi all, newbie here, looking for some advice.

I am paying the minimum monthly payment off my Barclaycard each month via DD. They contacted me to say that I am in a Persistent Debt situation and it will take 35 years to pay off the £8166 by just paying this amount each month.

The suggested amount to pay it off in 3 years they provided (£347)  is unaffordable to me and I've been through the last year's worth of statements, looking at the interest paid, and the amount coming down (I don't use it for purchases or cash at all, I'm  just paying it off)

For example - payment £221, of which £140 was interest.
I didn't get very far when I called them to speak about it -is it ever possible to suspend the interest? How do I go about getting more info?
Alternatively, would a balance transfer be a better option just to clear the debt off?

I'm prepared to pay slightly more than the minimum, but refuse to let my other essential outgoings suffer (roof over my head/ council tax / food) 

It's taken me a while to pluck up the courage to address this issue, so any tips appreciated.

Cheers

Brie

Any credit card is a non priority debt and Barclays knows that.  But they are pushed to ensure they provide the best for their customers (supposedly) and so need to tell people paying the minimum how long the debt will last, hence their contact.

Of course part of the problem with always paying the minimum is that the amount paid goes down a bit each month which prolongs the whole process.  If you were to set your payments at £225 each month then that will escalate the balance being paid off and ultimately reduce the overall interest paid. 

Would you be willing to default on the card?  Normally that means that the interest will stop.  Obviously it will be noted on your credit history and may cause problems for you if you need credit any time soon.   

The alternative of  a balance transfer on to a 0% offer would be great but would mean you having a good enough credit history to be given a card with a balance high enough to shift the majority of Bcard debt on to it.  And that would mean you would need to be able to afford double the amount of debt you have currently - is that a possibility?  Because when you apply for a new card the provider has no guarantee what you will use it for and must assume you may double your debts.  

MyRealNameToo

greenbeenz said:

Hi all, newbie here, looking for some advice.

I am paying the minimum monthly payment off my Barclaycard each month via DD. They contacted me to say that I am in a Persistent Debt situation and it will take 35 years to pay off the £8166 by just paying this amount each month.

The suggested amount to pay it off in 3 years they provided (£347)  is unaffordable to me and I've been through the last year's worth of statements, looking at the interest paid, and the amount coming down (I don't use it for purchases or cash at all, I'm  just paying it off)

For example - payment £221, of which £140 was interest.
I didn't get very far when I called them to speak about it -is it ever possible to suspend the interest? How do I go about getting more info?
Alternatively, would a balance transfer be a better option just to clear the debt off?

I'm prepared to pay slightly more than the minimum, but refuse to let my other essential outgoings suffer (roof over my head/ council tax / food) 

It's taken me a while to pluck up the courage to address this issue, so any tips appreciated.

Cheers

So why not fix the payment at £221, or ideally slight more?

With the variable DD as you very slowly pay it off the repayments go down each month hence why it takes 35 years to pay it off whereas stick to an affordable amount each month and it will go down quicker. 

Some banks give a reduced interest rate to those willing to pay their suggested payment if they are in persistent debt in exchange for the account being closed. You are still talking double figure interest though. 

For banks to consider 0 interest you need to destroy your credit history with defaults. 

If you are eligible for a BT offer why are you paying 20%+ interest? 

Brie

A quick calculation - should you need it - shows that paying the minimum of 2.5% (assumed) and a interest rate of 20% over the 35 years you would pay about £15800 in interest on a bill currently of £8166.  So nearly £24k paid in full.

Leaving the interest rate the same but consistently paying £225 a month (which I assume you have found manageable) means you'd clear the balance in just over 4.5 years and only pay about £4475 in interest. So about £12600 in total.  

Obviously if there was no interest you could pay it off even sooner at this rate - about 3 years.  

Decide what you want to do - default and then pay off over the next 3 years or set the DD at £225 and pay over 4.5 years.  Frankly if you are happy with the 4.5 years then my bet is that Barclays would be too.  Don't let them make you feel like you need to pay an amount that is not affordable.  Tell them what you can afford.  If they get stroppy tell them that defaulting would be your next option.  They should then back off and agree to what is affordable for you and it shouldn't negatively effect your credit history.  (they might not want to lend to you again but other banks won't have access to what Barclays knows).  Should at any point they get too pushy about your DD I'd suggest you cancel that and set up a standing order instead. 

Best of luck - it's doable one way or another !!! 

greenbeenz

Brie said:

Any credit card is a non priority debt and Barclays knows that.  But they are pushed to ensure they provide the best for their customers (supposedly) and so need to tell people paying the minimum how long the debt will last, hence their contact.

Of course part of the problem with always paying the minimum is that the amount paid goes down a bit each month which prolongs the whole process.  If you were to set your payments at £225 each month then that will escalate the balance being paid off and ultimately reduce the overall interest paid. 

Would you be willing to default on the card?  Normally that means that the interest will stop.  Obviously it will be noted on your credit history and may cause problems for you if you need credit any time soon.   

The alternative of  a balance transfer on to a 0% offer would be great but would mean you having a good enough credit history to be given a card with a balance high enough to shift the majority of Bcard debt on to it.  And that would mean you would need to be able to afford double the amount of debt you have currently - is that a possibility?  Because when you apply for a new card the provider has no guarantee what you will use it for and must assume you may double your debts.  

Thanks Brie...I didn't realise that defaulting wiped the interest....? I do qualify for a 0% balance transfer, so may look into that. Thanks for the sums, but sorry if I'm clueless here. £225 a month is doable yes, but I don't understand how it comes down so much faster then just paying minimum. Average payment over last 12 months isn't far off that? Cheers

greenbeenz

MyRealNameToo said:

greenbeenz said:

Hi all, newbie here, looking for some advice.

I am paying the minimum monthly payment off my Barclaycard each month via DD. They contacted me to say that I am in a Persistent Debt situation and it will take 35 years to pay off the £8166 by just paying this amount each month.

The suggested amount to pay it off in 3 years they provided (£347)  is unaffordable to me and I've been through the last year's worth of statements, looking at the interest paid, and the amount coming down (I don't use it for purchases or cash at all, I'm  just paying it off)

For example - payment £221, of which £140 was interest.
I didn't get very far when I called them to speak about it -is it ever possible to suspend the interest? How do I go about getting more info?
Alternatively, would a balance transfer be a better option just to clear the debt off?

I'm prepared to pay slightly more than the minimum, but refuse to let my other essential outgoings suffer (roof over my head/ council tax / food) 

It's taken me a while to pluck up the courage to address this issue, so any tips appreciated.

Cheers

So why not fix the payment at £221, or ideally slight more?

With the variable DD as you very slowly pay it off the repayments go down each month hence why it takes 35 years to pay it off whereas stick to an affordable amount each month and it will go down quicker. 

Some banks give a reduced interest rate to those willing to pay their suggested payment if they are in persistent debt in exchange for the account being closed. You are still talking double figure interest though. 

For banks to consider 0 interest you need to destroy your credit history with defaults. 

If you are eligible for a BT offer why are you paying 20%+ interest? 

Hi, thanks for your reply, I'm finally pulling my head out of the sand on my credit card debt, and am daft for paying interest. I agree. (sorry, don't know how to reply without quoting the whole quote)

Nasqueron

greenbeenz said:

Brie said:

Any credit card is a non priority debt and Barclays knows that.  But they are pushed to ensure they provide the best for their customers (supposedly) and so need to tell people paying the minimum how long the debt will last, hence their contact.

Of course part of the problem with always paying the minimum is that the amount paid goes down a bit each month which prolongs the whole process.  If you were to set your payments at £225 each month then that will escalate the balance being paid off and ultimately reduce the overall interest paid. 

Would you be willing to default on the card?  Normally that means that the interest will stop.  Obviously it will be noted on your credit history and may cause problems for you if you need credit any time soon.   

The alternative of  a balance transfer on to a 0% offer would be great but would mean you having a good enough credit history to be given a card with a balance high enough to shift the majority of Bcard debt on to it.  And that would mean you would need to be able to afford double the amount of debt you have currently - is that a possibility?  Because when you apply for a new card the provider has no guarantee what you will use it for and must assume you may double your debts.  

Thanks Brie...I didn't realise that defaulting wiped the interest....? I do qualify for a 0% balance transfer, so may look into that. Thanks for the sums, but sorry if I'm clueless here. £225 a month is doable yes, but I don't understand how it comes down so much faster then just paying minimum. Average payment over last 12 months isn't far off that? Cheers

The more you pay the more goes on clearing the debt which reduces interest being added so the balance is cleared quicker. Paying the minimum, lots goes on interest and little on capital so the interest being added is higher

MEM62

greenbeenz said:

Brie said:

Any credit card is a non priority debt and Barclays knows that.  But they are pushed to ensure they provide the best for their customers (supposedly) and so need to tell people paying the minimum how long the debt will last, hence their contact.

Of course part of the problem with always paying the minimum is that the amount paid goes down a bit each month which prolongs the whole process.  If you were to set your payments at £225 each month then that will escalate the balance being paid off and ultimately reduce the overall interest paid. 

Would you be willing to default on the card?  Normally that means that the interest will stop.  Obviously it will be noted on your credit history and may cause problems for you if you need credit any time soon.   

The alternative of  a balance transfer on to a 0% offer would be great but would mean you having a good enough credit history to be given a card with a balance high enough to shift the majority of Bcard debt on to it.  And that would mean you would need to be able to afford double the amount of debt you have currently - is that a possibility?  Because when you apply for a new card the provider has no guarantee what you will use it for and must assume you may double your debts.  

Thanks for the sums, but sorry if I'm clueless here. £225 a month is doable yes, but I don't understand how it comes down so much faster then just paying minimum. Average payment over last 12 months isn't far off that? Cheers

Because all the extra goes to paying down the debt and not on interest and every bit of debt that you clear does not attract any further interest.  The next month's lower balance = less interest = more of your payment clearing the balance creating a significant snowball effect.  

MyRealNameToo

greenbeenz said:

Brie said:

Any credit card is a non priority debt and Barclays knows that.  But they are pushed to ensure they provide the best for their customers (supposedly) and so need to tell people paying the minimum how long the debt will last, hence their contact.

Of course part of the problem with always paying the minimum is that the amount paid goes down a bit each month which prolongs the whole process.  If you were to set your payments at £225 each month then that will escalate the balance being paid off and ultimately reduce the overall interest paid. 

Would you be willing to default on the card?  Normally that means that the interest will stop.  Obviously it will be noted on your credit history and may cause problems for you if you need credit any time soon.   

The alternative of  a balance transfer on to a 0% offer would be great but would mean you having a good enough credit history to be given a card with a balance high enough to shift the majority of Bcard debt on to it.  And that would mean you would need to be able to afford double the amount of debt you have currently - is that a possibility?  Because when you apply for a new card the provider has no guarantee what you will use it for and must assume you may double your debts.  

Thanks Brie...I didn't realise that defaulting wiped the interest....? I do qualify for a 0% balance transfer, so may look into that. Thanks for the sums, but sorry if I'm clueless here. £225 a month is doable yes, but I don't understand how it comes down so much faster then just paying minimum. Average payment over last 12 months isn't far off that? Cheers

By paying the minimum you are paying mostly interest and then a little bit towards the capital, on a minimum payment DD then next month you won't pay £221 but you'll pay £220 which again is virtually all interest and only a tiny bit capital, following month it will be £119 etc etc

If you stick to paying £221 then first month is the same but the second month you've paid off an extra £1 in capital so will be charged a little less interest and so your next payment you have an extra £2 something going towards capital etc. Starts off small but in a year or twos time your payments will be mainly paying off the capital and the interest will be a minor part of it and so it vastly shortens your repayment period and the interest being charged.

Alternatively if you go to a 0% card then all of your repayment goes towards capital and so this is the quickest repayment path.