Just block it!!!

Tuesday 23rd September, 2008 - £7,926.83 in debt…

Barclaycard has got to be my least favourite financial corporation now.

I’ve had my card for over five years and, during that time, I’ve exceeded my limit and missed the odd payment. The Barclaycard people know that I’m not great with money, and they’ve had to write me a couple of nasty letters. But, as with any long-term relationship, they’ve learned to love me for my faults.

Over the last four months, I’ve phoned them twice to tell them I’m paying off my debts and to ask for various favours. The first time, I asked for a decrease in my APR and a block on my card. They said they’d do both of these things, but in practice they did neither. The second time I spoke to them, they again said they’d block my card, but then they sent out a shiny new one.

Obviously they weren’t going to be any help in my quest to repay my debts, but I wasn’t expecting an increase to my credit limit. An INCREASE! To £4,000! I hadn’t asked for it - the letter just arrived out of the blue.

Now, I’m not unreasonable. I know that Barclaycard has to make money, and I understand how the system works. I’m not one of those people who’s going to start blaming the banks for my uncontrollable spending urges. However, I’ve been led to believe that the credit card issuers in the UK have some kind of obligation to be responsible lenders.

And increasing the credit limit of a customer they know is a high risk, and who they know is strugglng to repay her debts, just before Christmas…? That doesn’t seem very responsible to me.

A Cuddly Toy

Tuesday 12th August, 2008 - £8,228.83 in debt…

I know I’m only three months into paying off my debt, but I can’t help thinking about things I’d like to spend my money on. It’s getting increasingly difficult to stop myself from getting more credit and buying a new car, a house, a holiday, maybe a nice 42″ TV… a cuddly toy?

Anyway, I’m not going to do that - I’m going to pay off my debts before I make any major purchases. Yes I am. But what happens if I pay everything off and my credit rating is still inexplicably poor? The credit crunch could make it very difficult for me to grab a mortgage, so I’d best get working on my credit score now.

The Money Saving Expert site has just launched a new credit scoring tool. This will tell you, at no cost, how much of a risk you are to credit companies. It will ask you ten easy questions, and you won’t even have to have any paperwork handy.

Neither borrowers nor credit reference agencies just have a ‘credit rating’ that applies for you across the board. The term is ‘credit score’ and it simply compares you against a mythical ideal borrower. It depends on factors that can be worked on or changed, and there is no such thing as ‘credit blacklisting’. There’s more information on credit scoring in this article.

Using the Money Saving Expert tool is quick and easy, and it allows you to consider how your score could be improved. For instance, it asked me how long I’d been living in my current house for - less than a year, one to three years, or over three years - suggesting that, once I’ve been here another year (it’s currently two years), my score will magically improve.

It also asked me how many credit cards I have, regardless of whether I use them. It emphasised that lenders get nervous about my access to credit - not just the credit I actually use - so I must remember to cancel all my credit cards as I pay them off. That was very useful to know.

Even though I’ve had no CCJs, never been bankrupt, and am on the electoral roll at my current address, a mixture of missed payments and loads of credit have made my credit score, in Martin’s eyes, “weak”. But, if I can make it to my 30th birthday according to the debt-paying-off plan, my credit score will change to “excellent”.

But that won’t happen if I forget to cancel any of my cards (as soon as I’ve paid them off), fall behind in my minimum payments (according to Martin, this could set me back years), or have a weak moment and apply for a loan on that coveted 207CC. Fingers crossed…

  What a cutie!

Tuesday 5th August, 2008 - £8,228.83 in debt…

Another week, another bit of pay trickling into my bank account, another £150 onto my Barclaycard… but I’m starting to flag a bit.

I think all this work is starting to catch up with me. Nine to five, plus evenings, weekends, working through my lunchbreak, and all for what? Money I can’t even spend! Money that goes straight to the bloody Barclaycard headquarters where, no doubt, it gets spent on all the things I want for myself - a holiday, tickets to Wimbledon 2009 (£102 for the men’s final!), a Peugeot 207 CC, a kitten, you name it. I bet Barclaycard headquarters is over-run with kittens. GRRRRR. 

I’m working all the hours I can, not seeing any money for myself at the end of it, and fantasising about being punched unconscious just to get some sleep. This must be what it’s like having children.

 Bournemouth - The Promised Land

Tuesday 22nd July, 2008 - £8,810.98 in debt…

I recently asked around on some forums about services that make it easier to get out of debt, and was bombarded with links to Whatsthecost.com, which apparently is what all the cool people are using. I just went there for the first time, and I feel like I’ve arrived late to a party. A really nerdy party where the guests soberly calculate what order they should pay their credit card bills in, but a party nonetheless.

Just to recap, I have debts on:

1. Barclaycard
2. Capital One card
3. Tesco credit card
4. Barclays overdraft.

I’m paying off the Barclaycard first as it’s got the highest APR, and I’m paying a set amount on each of the others by standing order (£50 on Capital One, £75 on Tesco). I’ve been aiming to pay off £400 a month, but that’s not always possible.

Apparently, I’ve been doing it a bit wrong, but not too wrong. According to the snowball calculator on What’s The Cost, I should be setting up Direct Debits for the minimum on everything but the Barclaycard, and paying off £470 a month in total if I’m going to meet my deadline of the end of April 2010.

The best thing about the snowball calculator doo-dah is that it’s given me some fascinating facts to spur me on. For instance, if I pay everything off in my given time, in the right order, I’ll pay a total of £996 in interest. Horrified gasp. But, if I were just paying everything willy-nilly without (ahem) “snowballing”, I’d lose an additional £650.

The site has even done a good job of justifying my first act as a debt-payer-off: Getting rid of the comparatively cheap NatWest card debt first. “Sometimes, emotionally [rather than financially], it makes sense to pay off the smaller debts first. This can be a great incentive when starting to deal with your debt.”

The calculator is easy to use if you’ve got your debt information in front of you - interest rates, minimum payments, balances and interest-free periods. You’ll also have to tell it how much you can afford to pay back in total per month. By tweaking this, you can find out how much you need to pay to meet your debt-free deadline. 

The results page tells you exactly how much to pay off month by month on each debt. Supposedly, you can then login to save your results and come back to them, but this facility wasn’t working for me. Never mind though - I just saved the webpage instead.

The site is full of similar debt calculators and gadgets, and I can see it being really useful over the next 21-and-a-bit months. Now I’ve just got to encourage my friends to join me for a debt reduction party.

In other news…

Yes, I did sell my soul to the Mail on Sunday for £1.50, but it was worth it. I also got a bit carried away this weekend and fell off the wagon, budget-wise, when I booked two concert tickets. But, at least when I’m starting to chew my own knees off with boredom in November, having spent almost nothing for five months, I’ll be able to cheer myself up by seeing McFly in Bournemouth. Simple pleasures.

Time to get serious

In the eighteen months since the credit crunch began to engulf the UK economy, where have householders been hit hardest?

In the late nineties, household spending was growing at a rate of over 4.5% year on year. Ten years on, this figure has been reduced to just 1.9%. The fallout from the sub prime lending crisis has forced Britons to transform their cavalier spending habits to that of canny spendthrifts.

The economical volte-face has been driven by a number of factors, primarily rising energy costs, rising grocery bills, exorbitant fuel costs and narrowing credit capabilities. As the cost of living climbs and property values tumble, consumer confidence has wilted.

The big six energy suppliers raised their gas and electricity tariffs by an inflation busting 14% on average during winter 2007/08. These price rises were blamed on skyrocketing wholesale costs and record crude oil prices.

Gas and electricity costs are expected to jump again this summer. According to energy watchdog Energywatch, such are the overheads with which energy companies are grappling, these rises are necessary to prevent the energy suppliers from slipping into debt.

The days of cheap food supply also appear to be a thing of the past, as the cost of an average grocery basket of essential items took a £15 leap from May 2007 to May 2008. These increases are the product of supply problems in key producing countries, mainly caused by bad weather and an increase in the use of land to grow crops for biofuel.

Increasing food prices are forcing many consumers to use emergency payment methods. A spring survey by the Post Office revealed four in ten shoppers were using credit cards to pay for groceries, council tax and utility bills.

However, credit cards have become a precious and (in some cases) unattainable commodity. Banks have become reluctant lenders, resulting in a climate where only applicants with blemish free credit ratings are accepted for credit.

February saw online credit card supplier Egg cynically cull over 160,000 clients, in a move widely perceived as the disposal of unprofitable customers.

The narrowing mortgage market has additionally contributed to UK consumers’ financial woes, with first time buyers effectively excluded from the more competitive mortgage offers. As homeowners’ worries increased, record applications for mortgage debt advice were received by the Citizen’s Advice Bureau.

Leading mortgage providers such as First Direct began to pull their most attractive mortgages altogether during March/April 2008. The Co-operative bank and a number of smaller building societies followed suit, while Halifax raised rates and manipulated its acceptance criteria to punish those who couldn’t afford a substantial deposit.

So what happens in the future? Is the worst of the credit crunch over, as many analysts are predicting? Have we corrected our credit dependent spending enough? Could the next raft of energy increases be the straw that breaks the back of a fickle economy?

I’d love to hear your views.

 …i need a desk tidy

Thursday 15th May, 2008 - STILL £9,485.54 in debt…..

It takes a human being two years to turn from a dribbling, incompetent baby to a bawling, incompetent toddler; it took me two years to “study” for my A-levels; and it took Take That two years to go from spreading jam on their bums for attention to releasing their first UK number one single.

But two years isn’t very long when you’ve got nearly £10,000 of debt to pay off. I’ve been happily plodding away for the last fortnight, Ebaying things here and there, musing about maybe switching lights off when I’m not in the room, blah, blah, blah… But nothing is really happening.

If I’m going to manage this, I will need to pay at least £400 towards my credit card bills every month. I currently pay £200 but, if I’m honest, I often re-spend some or all of that balance. My Barclaycard is the only one that I don’t re-spend, because I’ve blocked it. Or I thought I had…

As you might remember, last week I was furious with Barclaycard. Having called them in January to block my card and decrease my interest rate, I was told last week that neither of these things had been done.

While they couldn’t now decrease my rate (rage, fume, etc), they would block my card and send out another one. “No - don’t send another one. I just want to block it so I can’t use it”, I said. “No problem”, they said.

Yesterday, I received a text message from Barclaycard: “Your new card is on its way.” Why, thank you very much, Barclaycard. Thanks for both keeping your promises and listening to your customers’ wishes. I love you almost as much as I love the idea of being locked in an Austrian basement for 24 years. With Jeremy Kyle.

I’ve always been told that it’s best to block your card, as cutting it up doesn’t necessarily mean it can’t be used and, even if it goes in the bin, it can get into the wrong hands. Or, even worse, I could give into temptation and start using it again.

But the card issuers don’t exactly make it easy to be sensible with your money. I’m giving up – when it arrives, I’ll just cut it up and eat it. Or force-feed it to anyone who works for Barclaycard.

Sorry – I digress. The fact is, I’ve got to start doubling my card payments. I’ve also got to stop maxing out all my cards every month.

This month, with my Ebaying success, I’m on course to pay £330 towards my debt, but this isn’t enough. I’m going to use Martin Lewis’s website to work out my budget for the next two years, and bite the bullet: those shopping sprees will have to stop. When will I learn that it’s not my money to spend?

 I’m eating my phone with rage…..

Wednesday 7th May, 2008 - £9,485.54 in debt…

If you asked any of my friends to describe me, I don’t think they’d use the phrase “quick to anger” very often. Unless any of them were hiding up a tree outside my window earlier today, when I called my credit card issuers about my interest rates.

The story so far: In my first posting, I detailed how much I owe on each of my cards, and their interest rates. After that humiliation, I was further shamed by the comments my post received: “Why don’t you ask them to lower your APRs? It’s easy – I can’t BELIEVE you’re paying that much interest! You must be some kind of mug!” - Or words to that effect.

I tried it today, and now I’d like to know where I’m going wrong.

First, the Barclays overdraft: “Sorry, that interest rate is set in stone. We have a department that helps those who can’t cope with their debt, but you’re not in sufficient difficulty.” Thanks – that’s great news.

Second, the Tesco card: “Sorry, your interest rate can’t be changed, but that’s because you’re not paying any interest until October 21st.” Although this was a welcome surprise (I thought my interest-free period had just run out), I don’t suppose you could call it a victory.

Third, the Capital One card: “No, you can’t change your interest rate. We don’t do that. Bye.” Short but sweet.

Fourth, the Barclaycard: I phoned them in January to block my card, and they had offered me a small cut in my rate, so I was hopeful they might do it again. Their response: “Ah, it looks like your card wasn’t blocked at all – I’ll just do that now. And, hang on a minute, your interest rate wasn’t lowered either!” WHAT?!?!?!

“You can lower it now though, right? CAN’T YOU?” I asked, calmly.

“No – we cannot lower your rate at this point in time.” And the advisor and her manager repeated that phrase over and over until steam shot out of my ears and I destroyed a small village.

So where am I going wrong? Is there some sort of trick I should use? Are the Barclaycard people duty bound to decrease my rate like they said they would? Is there anything I can do about this?