Managing your credit card

Advice from Consumer Credit Counselling Service on how to manage your credit card. Call us on 03457 404 404 (textphone 18001 03457 125 563)

Interviewer:

'Today we are talking to Jan from the Consumer Credit Counselling Service the UK's leading Debt Charity. Jan based on your experiences of people with debt problems what advice would you give to people on managing their HSBC credit card.'

Jan:

'Well many people don't realise that if they are only making the minimum repayment that they could firstly be heading for trouble, and if they are doing the same on a number of cards, obviously the situation for them is even worse. It takes an average of about eleven years to clear a debt of £5,000 if you only make the minimum repayment, and that's if you never ever use the card again. So our advice to someone would be pay as much as you can of the balance each month, to repay the debt as quickly as possible.'

Interviewer:

'So are you saying that people who make the minimum payments to their credit cards have debt problems?'

Jan:

'Not at all, some people use credit cards for short term borrowing, and they will make the minimum repayment and clear the debt in a reasonable time. What I am saying is that if you the minimum repayment on your credit card it can be one of the early warning signs that you have impending problems and people can quite often not be aware of it. They treat the minimum repayment on a credit card like they would on a contractual payment on a loan and the two are very different.'

Interviewer:

'Ok, can you tell me about some other early warning signs?'

Jan:

'Well, I think that there are three early indicators that come to mind, firstly if you are using you credit card for day to day living expenses. Credit cards really should be used for occasional spending, or for luxury items. Secondly people taking regular cash advances using their credit card could be heading for trouble and using credit cards to supplement income is bound to lead to problems.'

Interviewer:

'Can you just briefly tell me why you see these as important indicators of financial pressure?'

Jan:

'I think occasionally buying petrol using your credit card is not a problem, and we all do that from time to time and occasionally people do need to take cash advances, maybe they haven't got a debit card or something with them. It's when people are doing these things on a regular basis and then only making the minimum repayment the chances are that the outstanding balance on the card is going to increase month on month. Effectively they are spending more than they are actually repaying, and for a lot of people, the first time that they realise that they have a problem is, when people refuse to take their cards either in stores or petrol stations.'

Interviewer:

'Can you just explain what you mean by supplementing your income?'

Jan:

'Yes, this is people who have spent their salary before the next one is due. So maybe they get to week 3 of the month and there is no cash left in the bank and their overdraft is to the limit, so they use credit cards to buy food, buy petrol, and effectively they are spending more than they are earning. This is a complete recipe for disaster.'

Interviewer:

'There are some really clear messages there, tell me what people should do.'

Jan:

'Well the first thing people must do is take a long hard look at their income and expenditure, if you are doing any of the things that we have discussed, and certainly if you are using more than twenty percent of your income to repay any credit cards or loans that you have, that's not your mortgage, that is credit cards and loans for a car or household furniture etc. you really do need to do something because you are heading for trouble, and the longer you put this off, the worse your situation will get.'

Interviewer:

'Thank you Jan. Don't forget if you have any money worries please don't hesitate to contact HSBC on 03457 404 404 or (textphone 18001 03457 125 563) Open from 8am to 10pm every day (except for Christmas Day, Boxing Day and New Year's Day). Calls may be monitored and/or recorded for security and service improvement purposes'.