Million use credit cards for housing debt
More than 1 million householders face homelessness or repossession because they use a credit card to pay their mortgage or rent, according to a Shelter survey.
A YouGov poll for the charity’s Roof magazine showed the highest proportion – 8 per cent - of those paying their rent or mortgage this way were in working class professions.
But it also indicated 4 per cent of the million plus householders paying to keep a roof over their heads with a credit card were from the middle/upper class category and one in 12 are Londoners.
Kay Boycott, director of policy and campaigns at Shelter said: ‘This is a shocking discovery, that over a million households in Britain are in such desperate circumstances that they need to borrow money on credit cards to pay for basic housing costs.
‘If people are already struggling to the extent that they fear losing their home, increasing credit card debt cannot be the answer.’ Many could face homelessness as defaulting on credit card payments could lead to repossession, the charity pointed out.
It warned credit card companies must recover their debts and they are not subject to the same rules as mortgage lenders meaning they can obtain a charging order on people’s properties and go back to court for a possession order to force a sale.
Of 2,022 adults asked in November last year, 6 per cent said they had paid their rent or mortgage by credit card in the past 12 months, which Shelter calculated to mean a national figure of more than one million people.
Martin Lewis, of the website MoneySavingExpert.com, said: ‘Mortgages are a debt, credit cards are a debt. For all but the seriously financially savvy, using credit cards to pay rent or mortgages is a mistake that can store up mammoth financial problems for the future.
‘If you can’t afford to pay your housing costs lumping up the borrowing is never the answer – far better is to seek help as soon as possible and start managing the problem.’
Specialist debt and housing advice is available via Shelter’s website or its free helpline on 0808 800 4444.
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Readers' comments (46)
kass | 11/01/2010 10:26 am
Social Landlords have been constantly pushing tenants to use credit cards and direct debits, offloading tenants debts onto the banksd and credit card companies, and so making it far easier for hard up tenants to end up in the street.
Instead of helping tenants to hold on onto their tenancies social landlords are facilitating homelessness.
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peter | 11/01/2010 11:20 am
In the late nineties, I regrettably pursued this policy ( credit card payment) for collecting rents and leasehold charges. This great for a while but things started to go wrong spectacularly for some of the tenants/leaseholders.
I unfortunately witnessed some terrible consequences and the debts some of my tenants spiralled into which several lost all their possessions and their homes eventually whilst others declared themselves bankrupt.
Borrowing from Peter to pay Paul is never a good idea when its about your home!
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simon stokes | 11/01/2010 12:31 pm
This doesnt actually tell the full story. I spent many years as a debt counsellor and encountered numerous people using their credit cards because of bad budgetting not because they had no money. Too many people still consider drinking, smoking and other "luxuries" to be essential expenditure over their household bills and cause thier own problems. Yes times are hard, but a lot of people dont help themselves and sweeping statements like those above dont tell the full story of what is happening in reality!
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pete | 11/01/2010 12:41 pm
Shelter are correct that paying rent with a credit card only makes sense for people who can afford to clear the debt in full before they're charged any interest, and this applies to relatively few social housing residents.
However, we should stress that their comments on easier repossession applies only to owners: if a tenant pays off arrears, repossession becomes less likely, and any accrued credit card debt only increases the risk insofar as interest gets charged. It's a shame Shelter doesn't differentiate. I look forward to reading Roof, to see whether they give more detail.
Kass is right to say that social landlords push Direct Debit, but that's very different from credit cards, which many landlords barely publicise. Two of the four landlords in our group actually refuse credit card payments, and our website recognises their payment reference and stipulates debit card only. The two landlords who do accept them publish 'health warnings' about debt & interest charges.
Landlords who do accept credt cards often do so after lobbying from residents who feel patronised by the landlord restricting their scope for managing their finances exactly as they feel fit. I tend to agree with these residents: being on a low income doesn't make you any less a grown-up, capable of grown-up decisions. Social landlords should support genuinely vulnerable residents, but it would be patronisning to assume that everyone in difficult circumstances is vulnerable.
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Karen | 11/01/2010 12:45 pm
Those in social housing have a lot more support than those who have a mortgage. The "benefit" of having a bank own your home mean you are more likely to lose it than if you have an RSL own your home.
However way you cut the cake - we are ALL struggling.
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Harry Lime | 11/01/2010 1:00 pm
Kass, once again your logic doesn't appear to make sense, however if you're staring down "both barrels" financially there is a school of thought to say it makes sense to whack your rent onto a credit card. The debt is unsecured and therefore you wouldn't have a house for anyone to seize should you default or similar. So far from facilitating homelessness, allowing residents to use their credit cards, whilst not advisable in any sense, actually helps people to keep their head above water, albeit temporarily. The implication would be the ruining of their credit record, which in the scheme of things might not be so bad. The alternative would be not paying your rent, which would DEFINITELY result in homelessness.
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kass | 11/01/2010 1:14 pm
Harry Lime | Mon, 11 Jan 2010 13:00 GMT
Once the credit card company gets to a (vulnerable) tenant with threats and court proceedings, seizing of goods etc.etc. the (vulnerable) tenant will use any money she can get hold of to fend them off - including rent money towards arrears which does put her home in danger of reposession. The fact is that some tenants only realize they have lost their home once it's gone, which is too late. That#s why they need a different approach to help them.
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Melvin Bone | 11/01/2010 1:21 pm
Surely the problem here is more to do with people who have a credit card who should not have been given one...This is due to the great credit boom engineered by Labours governments credit booming policies.
Surley a HA cannot be blamed for accepting a method of payment? I'm sure they would take milk bottle tops if they were legal tender...
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kass | 11/01/2010 1:40 pm
I think I have the solution to the credit card rent/debt problem.
There should be a credit card issued solely for rent (or mortgage) purpose and for NO OTHER reason.
The card would be the outcome of and agreement between social landlords and credit card companies, and issued to each tenant willing to pay by credit card. In this way Housing Benefit or any other rent money goes into this account and cannot be used for any other reason. The tenant would control his money in this account but not be able to take it out. The only time a tenant can take money out from this account is when she decides to close it.
The benefit for Creditc cards companies would come from an arrangements with the landlords and from any pubblicity.
There you are, I hope everybody concerned gets working on this straightaway and, if not entirely, much of this problem should go away.
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Harry Lime | 11/01/2010 1:47 pm
The biggest problem with all of this is peoples sense of priorities when it comes to their finances. I lost count of the number of "pre eviction" visits (last chance saloon time) when people would still be prioritising their brighthouse payments or Sky TV ahead of their rent. A lot of residents simply aren't prepared to listen to sensible financial advice, they think they know better or are misguided. There is only so much hand holding or signposting that landlords can do. A new leather sofa or 42" plasma telly are pretty useless when you haven't a roof with which to place over them.....
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