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Curing Covid credit card debt

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Query: I was temporarily let go from my job in April, as a result of the Covid-19 situation. Thankfully, my husband retained his job, but there was a big fall in our household income. To help alleviate some of the financial pressure on us at the time, we applied for a mortgage-payment break for three months. We also got into the habit of using our credit card to pay for our utilities, weekly shopping and online orders. As a result, we've accumulated a considerable amount of debt on our credit card. I will be back at work next week and our mortgage-payment break is due to come to an end early next month. How can we get our finances in order, so that we can meet our regular mortgage repayments again? - Sorcha, Dublin North

Answer: The Covid-19 situation has affected many aspects of our lives, including our personal finances. In situations where we are suddenly trying to manage the household bills on much less, it can result in us falling into debt.

Firstly, it's important to be aware of the financial supports available to you. Government departments and a number of financial institutions are offering a range of financial supports, including mortgage-payment breaks of up to six months. If you are worried about resuming your regular mortgage repayments at this time, contact your bank to discuss your options. During these challenging times, it's important to look after your financial wellbeing - and managing your credit card debt is central to this. There are a number of steps you can take to get you on track to being free of credit card debt.

First: Make a repayments plan. Start by figuring out how much you can pay off your credit card bill each month. It is important that you pay as much as you can afford. By paying more than the minimum repayment by even a small amount, you will reduce the time it takes you to get debt free and that will save you money in interest. The CCPC has a free credit card calculator, available at ccpc.ie, to show you how long it will take you to clear your credit card debt.

Second: Check if switching your credit card could save you money. Credit card interest rates currently range from 13.8pc to 26.6pc, so it could pay to switch. Some financial providers charge no interest on transferred balances for a limited introductory period. So, if you move your balance, every cent you pay will reduce your debt - as you won't be paying any interest for that period of time.

Third: Consider taking out a personal loan. Although you may feel reluctant to take on more debt, it might make better financial sense to take out a personal loan to pay off your credit card debt. Interest rates on personal loans are generally lower than on credit cards. If you do this, make sure you stop spending on your credit card, or else you will be faced with both the loan repayments and credit card repayments.

Fourth: Learn to manage your credit card. There are some small steps you can take to help you keep your debt to a minimum and ensure that your credit rating is not affected. For example, try to keep your credit limit low and don't view it as a spending target. Consider reducing the credit limit to an amount you can comfortably afford to repay every month, so you are not able to run up debt you can't repay. Set up a monthly standing order or direct debit for the minimum monthly repayment (or more if you can afford it) to avoid late payments.

 

Online order from struggling shop

Query:  I recently placed an online order for electrical goods from a local business. I've since heard rumours that it is struggling financially, due to the effects of the Covid-19 situation, and that it is on the brink of closing down. Am I entitled to a refund if I've already paid for the items and they go out of business before my order arrives? -  John, Co Kildare

Answer: If the business goes into examinership, liquidation or receivership you will be treated as an unsecured creditor. A creditor is someone the company owes money to. If you have paid for the electrical goods that the business has not delivered yet, and it goes out of business, then you are a creditor, as it owes you money. However, as an unsecured creditor, you rank behind secured creditors, such as the Revenue Commissioners, employees who are owed wages and banks that are owed money.

If a company changes ownership, the new owners may not have bought the previous owner's liabilities. This means the new owners may not be responsible for fulfilling orders placed with the previous owner, which have not yet been delivered.

In general, if you have paid money to a business that closes down before your item is delivered or the service is provided, you can take a number of steps.

First: If the business goes into liquidation before you receive your product or service, contact the liquidator to see if you can get the item. Second: Check the website of the business and also the website of the liquidator, examiner or receiver to get the latest news on the situation. Contact the official appointed to look after the affairs of the business for further details. Third: If you paid by credit or debit card for goods or services that have not been delivered, contact your card provider (usually your bank) to find out if it is possible for it to reverse the transaction using a chargeback (thereby securing your refund). You can find out more about chargebacks at ccpc.ie.

If you are trying to contact the business and it is not replying to you and you think it's gone out of business, you could contact the Companies Registration Office, as it may be able to give you more information.

 

Restarting pension savings

Query: I took a break from paying into my pension fund over the past few months to help supplement our household income. Our financial situation has recently changed, so I would like to start making regular payments again. Is this easy to do? Is there any way I can top up my pension to make up for the break in contributions?  - John, Co Kerry

Answer: An important first step will be to make a budget, so that you know how much you can afford to save into your pension each month. If you find budgeting difficult, there is a free and easy-to-use budget planner on ccpc.ie to help you plan your personal finances.

The next step will be to make contact with your pension provider, or relevant intermediary, such as a financial broker or human resources department for guidance on how to resume your pension contributions. If you are concerned about a possible shortfall in your pension pot, it's definitely worth considering a top up to your retirement fund. Your options will depend on a number of factors, such as if you are an employee or self-employed, as well as the type of pension scheme you have. For example, if you have an employer pension scheme, you may consider an Additional Voluntary Contribution fund, which can be used to top up your employer pension benefits, within Revenue Commissioner limits.

  • Email your questions to  lmcbride@independent.ie or write to 'Your Questions,  Sunday Independent Business, 27-32 Talbot Street, Dublin 1'.
  • While we will endeavour to place your questions with the most appropriate expert for your query, this column is not intended to replace professional advice.

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