Paying off your credit card debt

AidanR

But that's just it - the "price of money" is at an all-time low (at least in theory). Interest rates can't go any lower - that was one of the key reasons for quantitative easing. We're maxed out on stimuli short of Keynesian spending, and still no growth.

GhallTN6

0% credit cards... and collect the points, as long as you pay it off before the period ends.. make money out of the banks/supermarkets!! I've had lots of free lunches that way, even if you have 5k on a card (which I don't), a 3% transfer rate (£150) onto a 0% card is a lot cheaper than a monthly % APR over the same period.

Mad Roadie

GhallTN6 wrote:

0% credit cards... and collect the points, as long as you pay it off before the period ends.. make money out of the banks/supermarkets!! I've had lots of free lunches that way, even if you have 5k on a card (which I don't), a 3% transfer rate (£150) onto a 0% card is a lot cheaper than a monthly % APR over the same period.

I have rumbled you GhallTN6 - you are Chancellor George Osborne and I claim my prize!

TheStone

AidanR wrote:

But inflating away government debt isn't all that simple as bond markets will react by pushing up interest rates on the debt to compensate.

Blimey, we're in a hole.

There's an even bigger problem for the govt. They collect most taxes in arrears, but the vast majority of their future spending will be in advance .... and inflation linked (benefits, pensions***)

*** THE HUGE ELEPHANT IN THE ROOM

It's interesting too, that despite the deliberate devaluing of the currency ... the current accounts continues to grow at a record pace!!!

AidanR

Yup, there are estimates that put inflation linked debt at around 80% of the total. Although pension obligations make up a good chunk of that, and are possible to tackle through political means, this is not an easy prospect as we have seen.

That the current account deficit is growing is, I guess, no great surprise when our banking industry is in pieces and we have little traditional exports left.

verylonglegs

shouldbeinbed wrote:

verylonglegs wrote:

Credit card debt is very expensive and leaves you a lot poorer in the long run. You can question the timing but as a piece of advice it's one of the more sensible things a PM has said.

its also up there with ooh look the sky is blue and grass is green as a statement of the bleeding obvious though isn't it.

anyone with a fragmet of functioning brain knows 15+% apr is high and the banks rig it to keep you paying interest only if you're not on top of it, but this problem of spiralling costs and suppressed wages makes this sort of patronising non advice far harder to achieve and palate, particularly from someone of such financial privilege in the first place.

Mabe I should go down to the railway arches and tell the local down an outs to lay off the special brew and wear a tie once in a while of they want to get on in life.

If it's so obvious to everyone then it wouldn't be an issue would it? Yet we know personal debt in the UK is extremely high. I really don't understand why him saying it winds you up so much.

Bozman

It's about time that the mortgage rate went up, it'd teach a few people a lesson in the misuse of credit.
Similar to Labour under Blair and Brown, spending money that you haven't got to look good in the eyes of others, then leave it for the sensible folk to clean up the mess at their expense.

ooermissus

Bozman wrote:

It's about time that the mortgage rate went up, it'd teach a few people a lesson in the misuse of credit.

Spot on. Let's deliberately trigger a financial catastrophe to teach people a lesson.

Bozman

I think that you're going to get that financial catastrophe whether you want it or not!

thecm

I had to switch C4 news off when that tw@t Gove appeared and blamed the debt crisis on the previous Labour government rather than his partys backers those greedy b@stard bankers. But it does go to show the lack of financial acumen amongst the Con-dems doesn't it?

squeeler

"Mabe I should go down to the railway arches and tell the local down an outs to lay off the special brew and wear a tie once in a while of they want to get on in life."

It's an odd one this, I understand and mostly agree with the point you are making but maybe if someone had told the down and outs to lay off the Specials and wear a tie they would have got on better in life?
In the same way if we hadn't been told / indoctrinated / encouraged / socialized* into debt and it hadn't become such a "normal" way of spending money maybe we would all be better off?
Remember being told as a kid that you couldn't have something 'till you'd saved for it, maybe more of us should have taken that advice into adulthood.

(*take your pick)

Bozman

They shafted us in the 70s and then Blair and Browns Labour did it again by overspending, selling everything off for squat(gold for one) and didn't save a penny! Plus they had the chance to regulate the banks but didn't.
Things can only get better my ars*, it would be a little better if they had saved something for a rainy day while the good times rolled, Chancellor Brown on the other hand took the credit for something that was world wide and already in motion when Labour came into power.

AidanR

Yes, Labour could have done better with banking regulation, but do you honestly think the Tories would have favoured stricter regulation?!

thecm

Deficit bigger now under the Con-dems than under Labour and more than 50% of it is due to bailing out the banks rather than overspending. And as for selling things off for squat...consider BT/Gas/Power Companies etc etc etc of the ruthless Tory b@stards of the 80's under 'Lady' Thatcher, that's one of the reasons we're paying so much for energy now as you're constantly funding the dividends through profits. It'll be the NHS next under these tw@ts too

AidanR

Partisan bickering is tiresome and by refusing to see half the argument you have no chance of actually understanding the issues.

thecm

No, you're right I don't understand the issues at all...I'll just shut up. What I do understand is suggesting everybody pays their credit cards off is not going to increase growth in this country as it means more money to the banks rather than business there by limiting it's chances of hauling itself of the bones of its arse that it's now on...as did the Tories after it was pointed out to them.

EKIMIKE

Honestly, party politics has no place in the wider economic debate. The 'New Labour' of Blair and Brown subscribed to the 'free-market' discourse as eagerly as Thatcher and the Conservatives did. Therefore it's anon-starter. They are both as bad as each other.

What we need to do is get away from this all encompassing free-market ideology and it's frightfully obvious pitfalls.

Free market theory works well in certain sectors. Awfully in others. Just as Governmental regulation works well in certain sectors. Awfully in others. More a case of the right 'blend' of ingredients as opposed to one 'magic' ingredient (in the case of the past 40 years the delusions of the 'free-market'/rational self interest school of thought).

Right now, Cameron telling us to pay off personal debts is akin to seeking kudos for doing a poo. Great, everyone sh!ts, just like everyone has the benefit of hindsight! Cameron is over a decade too late with his message.

A change is needed in economic discourse. It's getting there. Slowly. Very Slowly. But the 'free-market' loud mouths are still out there too. And they're getting preferential coverage, still.

How much coverage is there of the 'Occupy Wall Street' protests is there? Surely this is a far more important event than a change to a speech?

AidanR

^ This ^

CambsNewbie

I don't understand why during the 'good times' and record tax revenues why were we still running a deficit?? When I have a good month I might treat myself with half and then save the rest. For some reason Brown and Blair seemed to think 'brilliant! More tax than we have ever collected before, let's borrow even more!!'

And selling our gold off for approximately $260 per oz when the price has hit $1600+ recently doesn't seem like such a good idea..

Oh well, what do I know?

Jez mon

Ultimately, neither party has a leg to stand on when it comes to the economy. The Tories of old made grievous mistakes when it came to nationalising utilities.

However, under Labour took over an economy which was growing, and left us one which was on its knees.

Ultimately, if you want to play the blame game, then it's pretty much Labour's fault, there were people, (few and far between) who were saying that the massive period of growth would come to an end. Far too many people were happy to listen to Mr "I've Managed To Escape The Clutches of Boom and Bust" Brown...

In the long term, paying your credit card bills off is exactly what the banks don't want you doing. They want you to pay the minimum each month...

dodgerdog

The basic principle behind paying off at the economic level is sound and from a political pov has great benefit.

The fundamentals are that paying off debt will mean more M1 receipts in the economy (long term) which has the consequential (2nd order benefit) of recapitalising financial institutions without the need for central bank action. The recapitalisation through deposits (less interest paid over debt period meaning more disposable in mid-long term) means that the gearing change required of banks (holding more cash against their lending liabilities) is achieved in a non-interventionist manner and hence is a non-inflationary way of achieving the changes required in the money markets. It also means that the banks are less dependent upon sovereign debt/receipt and can afford to recapitalise the likes of Greece at lower risk.

The down side of this approach though is that is in the short term recessionary in that it denudes the economy of cash spend which is currently keeping vast tracks of commerce (and there metaphorical heads) just above water.

Overall idea great and has significant long term benefits but countered by serious short term side effects which on the macro economic side may outweigh the long term effects

TheStone

I think whoever was in charge would have made the same mistakes. All govts are short sighted and pander to popular nonsense.

One of my problems with Labour was the amount of off balance sheet borrowing that took place. The Tories invented PPI, but Labour took it to another level and we're left paying way over the odds for it now. The public sector pensions are even worse. It's a massive amount of money that's been promised against the future.

The Tories have continued this. They know most of the students won't pay back the 9k tuition fees, but it allows them to pay the money to universities now and leave a future govt (taxpayer) to pick up the cost, without it hitting their balance sheet.

Housing associations are much the same.

I'm really lost for words with them printing another 75bn today. I just can't work out why they'd do this. Inflation nearly 3 times the target, short and long term interest rates at an all time low .... what exactly are they trying to achieve?

squired

I can't help but think that this is also about a wider message. In the Labour days they were spending cash like a drunken sailor and building up debt, while telling us that we should be putting money aside for a rainy day.

Now the current Government is trying to cut costs and reduce debt. This message is that the people living here should be trying to do the same things that the Government is trying to do. I don't mind that message if both groups are doing the same. It is a far better message than Labour telling people to do one thing while doing the opposite.

TheStone

squired wrote:

Now the current Government is trying to cut costs and reduce debt. This message is that the people living here should be trying to do the same things that the Government is trying to do. I don't mind that message if both groups are doing the same. It is a far better message than Labour telling people to do one thing while doing the opposite.

There's a lot of talk about cuts, but they're spending more than Labour were!

EKIMIKE

The details are as irrelevant as the party politics. 'Who privatised what' and Who introduced this' has no bearing at all. They were ALL following the same discourse (idea's). They all subscribed to the same school of thought.

The idea's were along the lines of; the 'free-market' has solved all problems (long term). Yes, there may be economic abberations, but the market will correct them. The market and ourselves have a rational self-interest in doing so. (What a fantasy I hear you say!)

Trace it back to Ayn Rand, Milton Friedman, Alan Greenspan and, crucially, 'Mr Invisible Hand' Adam Smith e.t.c. These are the main proponents in popularising the economic discourse of the last 40 years. Every single British Prime Minister and US President since Thatcher and Reagan respectively has subscribed to their doctrine's. Milton Friedman (the loudest mouth of them all) was adviser to both.

Unfortunately the last 3 or so years, up until this present day, cannot be classified as representing any school of economic thought. What we have is a chaotic situation of rash, short-termist decision based on little more than corporate/market pressures and interests. The 'Markets' rule by fear.

Our political leaders need to detach themselves from these Corporate/Market pressures and interests at all costs (even the most dire economic costs) in order to benefit in the long-term. Ultimately, and unfortunately, no leader wants to be seen as the one who lead us through the worst of times, regardless of long term prosperity. One might view it ironically as their rational self interest. Our leaders, least of all, should the selfish ones in this situation,

dodgerdog

^^ what he said +1

lifeform

TheCM wrote:

Deficit bigger now under the Con-dems than under Labour and more than 50% of it is due to bailing out the banks rather than overspending. And as for selling things off for squat...consider BT/Gas/Power Companies etc etc etc of the ruthless Tory b@stards of the 80's under 'Lady' Thatcher, that's one of the reasons we're paying so much for energy now as you're constantly funding the dividends through profits. It'll be the NHS next under these tw@ts too

If you're going to indulge in partizan trolling, at least try and exhibit an understanding of what it you're banging on about, rather than just the verbatim wailing of the disaffected ersatz-socialist.

Before you berate the "ruthless" Tories for the privatisation era, consider the period leading up to privatisation; union dominance, 3 day week, grossly inefficient national industry, 90% taxation, stifled private enterprise, Government fingers in every aspect of everything - the UK was deeply and massively uncompetitive.

That uncompetitive state had arisen because the Labour party had nationalised almost everything immediately after the war. So what had happened, in effect, was the private entities which had been smashed together from the bits of industry from when Britain was the industrial power of the globe had soldiered on without change or reform into the 80s.

These things are cyclic though - much of the post-war nationalisation programme had it's roots in stemming the profiteering undertaken by the Utility companies (in particular), and the constant bickering of the big four train operators. We've slowly come full circle.

To point out the bleeding obvious with regards deficit - of course the deficit is bigger. All the Coalition Government are going to achieve is to slow down the rate at which the deficit is increasing - such was the amount which Gordon Brown spent. He inherited a budget surplus in 1997. He left, not only having obliterated that surplus, but having spent more public money in a decade than was managed in the entire 20th Century - a figure which includes two world wars, the cold war, the inter-war Battleship arms race, and the creation of the health service.

Can you blame Labour for that? In some ways yes, in other ways no - the Tory and Liberal parties failed absolutely to point out that this was borrowing on an epic level. They failed to point out how resistant to scrutiny of the books Brown was. The media were complicit with their endless frothing over the paper profits we were making on house prices, and the electorate were complicit by mindlessly voting them back in twice, despite most of us knowing deep down that the whole gig was a bit of a con.

As Ekimike rightly points out though, it's largely academic who did what to whom - they all subscribed to the same financial theories, and all pursued them to the bitter end. Those theories were designed to keep Britain as a global player.

What intrigues me is why we, as a nation, did it.

What now follows, given that nobody in power seems to have the imagination or will to change the way things are done, is likely to be a long period of stagnation akin to the Japanese problem; crippling national debt, stable but flat economy, increasing population.

thecm

I'm not an ersatz-socialist...I am a working class northerner. Both Grandfathers endured an uprbringing in working class Edwardian Britain with not very much and thus formed a lifelong socialist belief as they saw the benefits that Socialism brought to them. I don't do Socialism as it's now cool to knock Dave and his cronies I do it because it's the way I was brought up.

Yes, Brown was possibly the worst (un-elected) PM we have endured, he cocked up big time with for instance PFI, failing to drop what must have been, evidently, even at the outset a flawed method to fund the public services they craved to supply to a country that had seen them massively under funded for a generation to support a country that had become hooked on low taxes.

What annoys me now is the constant blame attributed to him for the deficit when whoever had been in power would have done exactly the same to bail out the UK banks and this is where greater than 50% of the deficit has come from. Arguably if the country hadn't wanted to maintain its status as a major player in the world...and lets be honest a large % of the public still think of us as Great Britain and expect us to be... some of the significant borrowing to maintain the Defence Forces and fund the rebuilding of public services could've and perhaps should've been avoided but the country liked it but didn't like the concept of paying for it with the increased taxes they needed to.

The country continued to elect them as times were (it seemed) good and the Tories were not a credible alternative lacking a viable leader and torn apart by infighting.

As a child of the 70's I remember the power cuts well but little else to be honest. What Thatcher did was disassemble the nationalised industries seemingly without understanding where it would end 20 years later. Large parts of our Infrastructure owned by foreign organisations and public subsidys to the rail industry to support large dividends. She proved a point to break the unions rather than consider the long game.

shouldbeinbed

verylonglegs wrote:

shouldbeinbed wrote:

verylonglegs wrote:

Credit card debt is very expensive and leaves you a lot poorer in the long run. You can question the timing but as a piece of advice it's one of the more sensible things a PM has said.

its also up there with ooh look the sky is blue and grass is green as a statement of the bleeding obvious though isn't it.

anyone with a fragmet of functioning brain knows 15+% apr is high and the banks rig it to keep you paying interest only if you're not on top of it, but this problem of spiralling costs and suppressed wages makes this sort of patronising non advice far harder to achieve and palate, particularly from someone of such financial privilege in the first place.

Mabe I should go down to the railway arches and tell the local down an outs to lay off the special brew and wear a tie once in a while of they want to get on in life.

If it's so obvious to everyone then it wouldn't be an issue would it? Yet we know personal debt in the UK is extremely high. I really don't understand why him saying it winds you up so much.

I just think of all the things he could be saying in the limited time that he has to spend getting his message out personally to the rank and file, this is a very very long way down the list of what people need to hear from the leader of the country.

If it needed saying (big IF) then it is at a level of coming from a minion somewhere down the scale, and it is worrying that, even as a draft, this non information was even considered worthy of inclusion at this level.


you should go into politics yourself its only become an issue really since 2008 when the world went bang and people (inc the tories who'd been promising to match labour to that point) suddenly realised it was all built on far softer sand but by then people were losing jobs, money, wages; prices were rocketing exponentially past disposable income and an awful lot of people who were otherwise ticking along happily able to manage their credit card finance, almost overnight, found themselves in a far darker place with their short term/high interest 'cashflow' debts that suddenly became long term high interest burdens.

hindsight is a beautiful thing but really not a whole lot of use to people in that situation.

beverick

What's debt?

I was recently advised by an IFA to pay off my mortgage. I told him I didn't have one. He then suggested I paid up my credit cards. I mentioned that I have a positive balance on my current cards. He then suggested I paid off any personal loans. I asked if he included the 0% one I have, the one where the outstanding balance is held in an interest bearing account.

I then asked him how much he wanted to borrow.

Seriously, it would help the economy by releasing some of the balance held by the card issuers as security against debt (ie banks) to invest elsewhere, it would mean that people were more likely to go out and top up their cards with a new purchase, or be more amenable to taking out a loan and hence get the economy moving again, it woudl allow the interest paid to be spent elsewhere.

Bob