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Persistent debt: when credit cards get out of control

calendar03 July 2017

Marianne Clough's avatar Marianne Clough

Persistent debt: when credit cards get out of control

More than half of the UK population has a credit card and, for many, it’s a useful resource, offering cashback, greater protection on purchases and, of course, the opportunity to spread the cost of a large item.

The problem comes when people are using credit cards all the time, something known in the industry as 'persistent debt'.

The Financial Conduct Authority (FCA) is rightly concerned. In June 2017, £67billion was owed on credit cards and this kind of debt is growing.

No wonder the attention has fallen on the 4.5million people who have problem debt and especially the 1.6million making the minimum payment month after month after month.

The FCA wanted the debt advice sector’s thoughts on just what should be done and today that consultation time is over. CAP is keen to see just what happens next!

The FCA’s proposition is that, after 18 months of paying just the interest and not tackling the debt, a credit card customer should be:

  • Sent a letter encouraging them to pay off more, warning of the dangers if they continue to just pay the interest and charges – it will also point towards debt help
  • Sent a further reminder if they’re still in persistent debt after another nine months
  • Sent a letter, after 36 months in total, asking the customer to choose an alternative payment mechanism to pay more quickly, with a signpost to debt help – if they don't engage, the card will be suspended or cancelled, and if they can’t afford to pay more, they’ll be offered support (such as stopping interest and charges) to help them pay off the balance

As you’d hope, Christians Against Poverty has responded in full to this consultation because, in all such cases, these decisions at the top can have a huge positive or negative effect on those who are rarely heard.

As part of our remit to speak up for those who don’t often have a voice, we’ve explained how more than six in ten of our debt clients were using credit cards to pay a household bill or other debt repayment.

We warmly welcome the FCA’s ideas for intervention when a credit card debt seems to be persistent, but we’re also raising concerns that for many, it will come too late.

Instead, we’d like to see the first letter going out at six months. We believe that 18 months is a long time to endure unmanageable debt and, in our experience, the longer a problem continues, the less likely people are to open their post.

We find CAP clients who wait two years before seeking help are too afraid to open letters (75%) and too scared to answer the phone (64%).

We’d like a softer approach at an earlier point, highlighting the dangers of unsustainable credit but in a way that is likely to trigger a good decision-making process.

As ever, we’re grateful for the work of the FCA, which has already brought about huge changes in a changing industry – and it’s an honour to be asked our opinions.

‘It would have taken over 20 years to clear my debt.’

calendar03 July 2017

Vicky Eves's avatar Vicky Eves

‘It would have taken over 20 years to clear my debt.’

A while ago I found myself in debt and didn’t really know by how much or what I was going to do to get out of it. I’d lost my job whilst my dad was terminally ill in a hospice and although I found a new job very soon after he passed away, it was a big drop in salary and I was overwhelmed with what life was throwing at me.

If I’m honest, I was in denial but I also didn’t realise what I was doing or the consequences it would have on my future. I hid my head in the sand, and even stopped opening my post. I was too embarrassed to admit I couldn’t afford to do things, and kept doing them anyway, whether it was going on holiday with family or going out with friends. I wasn’t earning enough money and kept putting things on credit cards. When I hit the credit limit on one card, I did a 0% balance transfer and moved it to another card and started again. It technically wasn’t costing me money as it was always on 0% cards and I was making the minimum payments so I didn’t think it was a problem.

This went on for a while, probably a few years. The church I was going to at the time was hosting a CAP Money Course. I thought if I went along and learnt how to budget I could clear it all off in no time. In the break of the first session, I went and had a chat with the leader of the course. I hadn’t appreciated all the different things CAP do apart from these money management courses. I didn’t know anything about their debt help/management services. After chatting with the leader, I was starting to realise the mess I had gotten into. She was helpful, understanding and I didn’t feel judged in any way. She gave me her card and I got in touch with her after the course. I didn’t really have any reservations as I knew I needed help. If you have a leak, you call a plumber, so if you have money problems, why not call in someone who knows about money?

We went through everything: income, outgoings, bills, my spending. I have to admit it felt slightly invasive but it was really insightful and I realised where I was not helping myself get out of debt. I didn’t realise the figure of my debt until we did this. I was shocked to find it was over £8,000. By this time I was in a different job and I was earning a little more money but I still was only just about making the minimum payments on my credit cards, let alone clearing them. I really couldn’t see a way of ever paying it back.

Once we’d gone through my finances, the calculations from CAP said in the situation I was in at the time it would take over 20 years to clear my debt. I honestly felt my world crashing down around me. I felt like a complete failure and that I had let everyone down, especially as I was brought up in a family where you didn’t spend money you didn’t have and if you wanted something you saved up for it. That feeling of shame was really hard to deal with - even though it was pressure I was putting on myself. I totally see why debt and mental health can be so tightly interwoven.

As part of the debt management process, CAP took over the managing of my money, dealt with my creditors and took a lot of the stress away. I took on extra work, sold some things at car boot sales and online and found ways of reducing my spendings, such as meal planning and car sharing. Amazingly I was out of debt within a year. I could never have done it without the help and support of CAP. They genuinely turned my life around. I’m not saying I’m a money expert now, but I have a budget, I open all my post, and only buy things I can afford.

If you are struggling with debt, you genuinely can’t afford to not call CAP. I understand why people may have reservations about admitting their problems as there is a lot of stigma about debt but it’s the first step to turning things around for yourself. The longer you leave it before facing the problem, the more in debt you will get, and the harder and longer it will be to get out of it. You will be supported, cared for and loved throughout the process. I have no doubts that it will be one of the best things you ever do.

Here are my top five things that I love about CAP:

  1. Their services are 100% free.
  2. You don’t have to be a Christian to access their services – all are welcome!
  3. They won’t suggest anything radical, and will help you to come up with solutions to help yourself.
  4. You will learn a lot about yourself as well as money whilst working with them.
  5. They do change lives!

Since becoming debt free, Vicky is now blogging under ibeatdebt.com

Warmth isn’t just for the wealthy – why we love the summer

calendar22 June 2017

Marianne Clough's avatar Marianne Clough

Warmth isn’t just for the wealthy – why we love the summer

Daily life on a budget, as many of our debt clients experience, is productive but super tough. So, when that rare thing happens in Britain and the sun comes out, all of us at CAP are glad because it does bring some relief. Here are my nine favourite things about summer that we can all enjoy, regardless of income.

  • Playing out and sitting out means the house can feel twice the size. If you have children, getting them out playing in the garden or on the street means you get a little more space indoors, and maybe even a bit of peace (occasionally!)
  • Scientists say warmth causes our brains to release serotonin, making us all nice and relaxed, so even if you’re feeling tense about something, lapping up the heat can help you breathe deeply, rest well and get some perspective. If the stuffy nights are stressing you out, snoozing in the garden could make up for any disturbed sleep.
  • Community events – be they a church barbecue or a free local festival – can provide somewhere colourful and fun to go without having to empty your piggy bank (as long as you’re careful, of course)
  • You can grab a cuppa, sit on your front step and chat to the neighbours over the fence. You can feel like you’ve got company without feeling like you’re imposing yourself.
  • In winter, you’re forced to wear multiple layers and inevitably it all needs washing. In summer, it’s all about the flip flops and shorts. Less clothing equals less washing!
  • Bigger washing projects like bedding, curtains and sofa covers can all go out on the line – no need for tumble driers and the extra energy cost that goes with them!
  • Apart from the washing machine thumping away occasionally, you’re largely living energy free. Salads and cold foods require no cooking, of course, and you don’t need to stay in watching TV with the lights on when you can be outside with a healthy plateful soaking up the warm evening.
  • Things are growing fast now in the warm weather. If you’ve planted a few veggies or fruits they’re likely near to bearing fruit, which ultimately means cheap eats for you! There’s still time to plant from seed as well – radishes and salad leaves have plenty of time to grow while it’s warm.
  • You can pretend you’re on holiday without having to venture very far at all. Throw on something you once wore on the beach, get your picnic towel or deck chair and lie back with a book (just don’t forget the sun cream!) Pour yourself something cool and you can feel like you’re living it up when you’re no further than your back yard. Bliss!

What do you love about summer? Drop us a comment below and let us know!

Who’s caring for the carers?

calendar13 June 2017

Joseph Allison's avatar Joseph Allison

Who’s caring for the carers?

From 12 to 18 June this year, it’s Carers Week – a week celebrating those who dedicate their lives to caring for others.

To mark the occasion, events are happening all over the UK, bringing together a wide range of charities and organisations to build much-needed carer friendly communities. Carers Week celebrates carers of all ages who are putting in hard work to care for the people they love, often for little or no pay. These are the people that are there at all hours, dealing with a wide range of situations, from long term illness to old age to mental ill-health and addiction. Often they’re there because there’s no one else.

Carers do lots of different jobs depending on the situation of the person they’re looking after. They may be there to offer practical support with day-to-day activities, emotional support or advice in financial matters. They may be measuring and administering medicine or helping the person to get around. The question is: who’s caring for the carers?

Without the right support, both emotionally and financially, being a carer can become very difficult. While these people are so focused on someone else’s wellbeing, their own physical and mental health can be affected, they may struggle to sleep, maintain relationships with friends and family or hold down a job.

Sadly, this was a true story for Richard* and his wife Jodie*. Jodie was suffering with bipolar disorder and, as a result, had to leave her job. As her health deteriorated further, Richard decided to give up his job too in order to be at home to care for her. In a position where neither of them could work nor bring in a stable income, and with Richard finding he couldn’t claim Carer’s Allowance, the couple struggled to cope and sadly fell into serious debt.

‘We had no income,’ says Richard. ‘People lent us money, we used credit cards, and it all got out of control. We went without food for a week once – we just didn’t eat.’

For Jodie, the combination of her condition and the stressful situation they were in caused her to lose all hope.  ‘All I could see was blackness,’ she explains.

Thankfully, Jodie and Richard weren’t as alone as they may have felt. Jodie was volunteering at her local church hall one day when she happened to meet a CAP Centre Manager and built up the courage to explain her situation. The couple were then visited at home and an affordable plan was put in place to allow them to start paying off their debts. With the help of CAP and their church, things started to feel a lot more hopeful. ‘We owe CAP a debt of gratitude,’ says Richard. ‘They’ve saved us. There’s light at the end of tunnel.’

If you need help with debt, whatever the reason may be, call CAP free of charge on 0800 328 0006 between 8:30am and 5pm, Monday to Friday. To find out more about Carers Week and how to pledge your support, visit the official website and join the conversation on social media using #CarersWeek.

*Names have been changed in the interest of confidentiality

Show up for the general election

calendar07 June 2017

Emily Parkinson

Christians in Politics is an all-party, non-denominational organisation which seeks to encourage and inspire Christians to get involved in politics and public life. Take a look at their video to find out more, or hop over to pay them a visit at christiansinpolitics.org.uk.

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