How this credit card debt got out of control

IT was the text message I was dreading, my mate’s attempt to get out of credit card debt has failed miserably. This is how he got himself into serious financial strife.

I RECEIVED a message the other day from a mate confessing his sins.

He was in trouble, serious financial trouble.

And for the sake of this tale I’m going to call him Toby.

Sadly for Toby, this isn’t his first rodeo.

Just last year he got himself not knee deep, but neck-deep in credit card debt.

He’d managed to rack up more than $50,000 on plastic and felt he had no way out.

When he first told me I thought he’d must have some sort of addiction, like gambling or something sinister.

But nup, nada.

He’d just lived way beyond his means, purchased crap he didn’t need and went on multiple overseas holidays that he couldn’t afford.

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It was when he was staring down the barrel of this whopping card debt that some would say, luck came his way.

His dad offered to dive in and rescue Toby, a man in his late 30s.

He said he’d wipe his son’s entire debt for him interest-free, but of course he’d had to eventually pay it back.

Not many people would be lucky enough to have parents offer such a generous helping hand.

But really this luck in the end proved to do Toby no good.

At the time Toby told me he hadn’t gotten rid of all his credit cards, but he was in much better financial shape and was on track to paying back his dad.

Australians owe more than $50 billion in credit card debt.

Then last week when I received a message from him telling me the worst had happened.

“My credit card debt is out to $17,000 again,” he wrote.

Holy crap.

I felt instantly disappointed, but in some ways not overly surprised.

He was now in a worse situation than last year when he had more than $50,000 debt.

Now he was looking at close to $70,000.

That is serious debt and some is accruing interest at a rate of about 20 per cent.

Anyone wanting to pay this giant debt off in two years at a rate of 20 per cent is going to have to find $3500 per month — a figure that is unrealistic for most.

And they would end up spending $14,000 in interest.

Credit card debt is one of the worst forms of debt people can get themselves entangled in.

The best thing people like Toby can do is try and get a balance-transfer card with a zero per cent honeymoon rate, push all the debt onto this card and then pay it off as quickly as possible.

While Toby’s dad is none the wiser about his latest mountain of debt, Toby told me he’s getting help.

He’s knows putting rent and cigarettes on his credit card isn’t going to get him anywhere.

While it’s easy to give Toby a rap over the knuckles, he gets some serious points for seeking help from a financial counsellor.

He knows he has a problem and it’s got to stop.

I have faith he can turn this around. I hope he does.

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@sophieelsworth

Originally published as How this credit card debt got out of control