UK Landlord Forum / Life

The figures come from Shelter (http://england.shelter.org.uk/home/index.cfm). More than a million people used high-cost credit card loans to meet rental or mortgage demands in the last 12 months. Of 2,000 households polled, 6% had relied on a card, and when payments were made by young people aged between 18 and 24 that figure rose to 7.5%. If their credit rating isn't good - and, let's face it, using a Barclaycard to cover the rent isn't a positive sign - they could be faced with punishing interest rates as high as 40%.

Why do people pay with credit cards that have high interest rates, with all the interest free credit cards around? It's insane!

Whhhoooooooooooow
Now that is scary mary man, If there is one thing credit cards should not be used for its paying your mortgage, ok a one of etc but not as a regular thing.


Badger

Yeah, it be MUCH cheaper to get a bank loan (if you're not willing to get an interest free credit card)

Its unclear how these people are using the cards.

At times when I've been between jobs, I've started putting as much expenses as possible on my credit card in the short term. The justification is simple; I can't pay my mortgage with the cash from my card if my current account runs dry (not without some kind of balance transfer which takes time and is often not available to credit current accounts these days, only to pay other cards). But I can pay for my petrol, my groceries, my utility bills. Using the card in this way extends the period of time I can survive before getting thrown out my house, even if it does cost me some interest in the short term. Effectively I am using my credit card facility to continue paying my mortgage.

As long as you're disciplined with paying off the card as soon as your situation changes, its a solid approach. Let's face it, if your house is reposessed a couple of grand living expenses on your credit card is probably the least of your worries.



V

Trust me to be the opposite, the credit card crept up to a silly ammount with realy high (for me), at about £6k, I was doing a draw down on my mortgage for some home imporvements and pulled enough to clear the credit card - repayments are significantly lower!!!

Credit cards are useful if you use them properly, as V displayed.

But one thing is for sure, paying mortgages with high interest credit cards is insane. If people are making basic mistakes like that, it's no wonder they're struggling.

I have a 15k limit on my Debinhams store card, when things get tough, i just move in there lol


Badger

Do they even give that much credit? That's crazy!!

The most important thing if you do have a credit card balance is to know what it is and what your rate of interest is, and then the next most important thing is to minimise that rate of interest. There's so many 0% deals around its quite easy to do this. Worth factoring in the 2% or so balance transfer fee they've taken to charging, and do make sure you read the small print; my first 0% transfer card had a clause in the conditions so that if you paid off all the transferred amount before the end of the 0% period you were retrospectively disqualified from the 0% deal and then had to pay all the interest you'd dodged.

Then, pay them, and finally, figure out why you had to use them in the first place and how you can avoid it in the future.

Some of my credit card debt has come from not really earning enough to live when I first left college (and I don't mean live in luxury either!), moving around more frequently than I could afford to try and develop my career (climbing the ladder each time) and having spent a lot of time not really knowing how to manage my money. People often buy things to compensate for what they really want in their lives and feel they can't get, and it can take some work to figure out what is compelling you if this applies to you. Take a look at the Spendaholics show on BBC Three if it does, which may get you thinking.

Now, I'm paying it off - £500 a month. It's going to be clear by my 29th birthday in December of next year. When its gone, total disasters withstanding, it will be gone for good.


V

Good stuff.

I think i'm going to write an article on credit card management. Too many people are getting it wrong. I'm no expert, because I haven't dealt with them enough, but I know how to manage them well enough not to pay any interest.

I think it's called the "grace" period where interest rates are low/non-existant. You just need to close the account as soon as the grace period is over, and then apply for a new card and transfer the balance!

Another thing to watch for - make sure if you're transferring a balance your application for the new card isn't going to a bank that just rebrand their cards for someone else, as if it is there's a risk you're applying to the same bank as your current card. For example, MBNA rebadge their cards for all kinds of people - Virgin, WWF, and of course themselves. The reason not to do this is the chances are very high they'll reject you (as they'll know what you're up to, and you already have credit with them), which will then negatively affect your credit rating.

The flip side is that if you find a good deal on one of these brands, you can sometimes find an even better deal on another one. Eg. if you find a 8 month 0% deal on Virgin you might check out MBNA and find they'll issue the card direct with 12 months 0%. Small print likely to be exactly the same and you'll still be dealing with the same call centres etc. So its worth checking out.


V

PS. I wouldn't recommend MBNA, they're just a good example because they rebrand their cards so much - but its also worth thinking why they might need to do this.

Cor, maybe you should write the article, V

http://www.fool.co.uk/credit-cards/credit-cards-comparison.aspx

There are currently a lot of 13/14 month interest free cards on the market right now! They're trying to sucker people in!

Don't think I have time to write the article hon, but here's a bit more info for it. Barclaycard is the top of that list on the MotleyFool site - and another great example of why its vital to read the small print. A while back they did a deal whereby you get a great 0% offer if you agree to spend a certain amount on the card each month. However, you need to check in your agreement which balance gets paid first. On the Barclaycard, your monthly payments are first used to reduce the transferred balance, *then* your purchases. So, if you transfer 10K and spend the required £50 a month (for example) onto this card, you'll find yourself paying the usual 14% or so on that £50 (plus another £50 every month) until you've paid the whole of the £10K, or transferred it off again to another card.

And that adds up fast.

Not a good deal.

If you can spot these gotchas though you won't get suckered-in. You're only the sucker if you can't tell who the sucker is.


V

Thanks a lot, V

I would never sign up for a card where you had to spend a set amount every month! That sounds dodgy from the word "go"!