ADINA CAMPBELL:'Taking on debt in the form of credit, is part of everyday life, 'and for many people, 'the thought, "You can buy now and pay later" 'is too difficult to resist.'
ADINA CAMPBELLSo it's easy to be tempted by credit, especially if we don't pay attention. 'Meet Karen. She's 21, works in a café and is a keen shopper.
ADINA CAMPBELL'Karen's debt problem began when she went shopping 'to buy this suit for a job interview.'
ADINA CAMPBELLSo what happened to you a few months back?
KAREN SYME:Well I just went to buy a suit, think I had like £120 saved up.
KAREN SYME:Went up to buy it and the woman was like, "do you want a store card with it?" Just because I didn't have one, yeah why not?
lONA BAIN:A store card is not given to you by a bank, it's actually given to you by a shop. And you'll see them advertised whenever you go into a high street shop.
lONA BAIN:And the shop does the same as a bank does, it gives you credit for spending in-store. Now they also charge you an extra amount if you don't pay back that amount on time.
KAREN SYME:They have really nice tops in here.
ADINA CAMPBELL:Avocado shaving cream!
ADINA CAMPBELL:'Store cards and credit cards allow you to buy stuff 'without shelling out your own money to begin with. 'But they can end up costing you more in the long run.'
KAREN SYME:Got the suit and then got the card, she done like the credit check and everything. So I like handed over the money.
KAREN SYME:You don't need to pay for this now, "What?!" So then I was like, "Oh my god this is amazing". Went and bought loads of other stuff with the money because I didn't have to pay for the suit right then.
ADINA CAMPBELL:So did you think you were just getting the suit for free then?
KAREN SYME:Well no I knew I was going to have to pay for it but I just kind of thought at the time, "Oh this is great", like, "I can pay it off, like, whenever"
KAREN SYME:About six weeks later, I got a letter through saying "So you owe us the £120 for the suit" I didn't really know what to do because I had no money to pay it. No money in the bank. Took the letter, put it in a drawer and just kind of forgot about it.
ADINA CAMPBELL:When these letters did start to come through, did you not think, "I've got to sort this out. These are letters demanding that I pay up"
KAREN SYME:Yeah but I thought, see because I didn't have any money I thought they couldn't take it until I'd got some, and then I could pay it off.
KAREN SYME:And I didn't think that they could take the money out my bank without obviously any money being in there.
lONA BAIN:It can be like getting a lovely big voucher to go into that shop but actually that isn't free money, you will have to pay that back and if you do fall behind on those payments, you're going to have to pay even more than you would on a credit card, than a mortgage, on almost every other type of debt.
KAREN SYME:I had no idea we had to pay interest, I thought it was just, you paid that money for the suit and you paid that money back.
KAREN SYME:The suit was £120, plus about £20 or £30 more on the interest rate.
ADINA CAMPBELL:'But as well as the interest, the bank charged her for being overdrawn. 'Then a month or so later, 'the company took another payment out of her account. 'The bank then charged her for being even more overdrawn, and so on.'
KAREN SYME:Add the £30 that they tried to take out originally for the first payment, and then plus maybe about £50 more in bank charges.
ADINA CAMPBELL:'As Karen ignored the demands for money, the cost of her £120 suit 'crept up to over £200.'
ADINA CAMPBELL:How did you end up solving the problem in the end?
KAREN SYME:I solved it with a really embarrassing chat with my mum.
ADINA CAMPBELL:What was your mum's response like?
KAREN SYME:She shouted at me for a bit, said I was irresponsible, should have told her that I'd got a credit card, and finally offered, like, helped me out.
ADINA CAMPBELL:Did you end up paying your mum back?
KAREN SYME:Yeah. Yeah I did.
ADINA CAMPBELL:So what are your spending habits like at the moment?
KAREN SYME:Well I get paid weekly… So it's just cash, and I just deal with that every week and try and budget it. But I don't borrow money, I don't have an overdraft or anything I don't use cards at all.
lONA BAIN:If you are having problems with your money then it's always worth seeking help.
lONA BAIN:There are plenty of debt charities out there, there's a citizens advice bureau, there's no need to struggle on your own. Always seek help if you do have debt problems.
Adina Campbell investigates debt, including how easy it is to get into by using store cards and credit cards.
She meets 21-year-old Karen, who ran up a large debt on her store card, after a £120 purchase soared to a £200 debt due to interest and bank charges.
Finance expert Iona Bain explains how store cards work and what to do if you have debt problems.
This clip is from the series Made of Money.
Teacher Notes
Explain in more detail how interests work and how quickly debt can mount up.
Use online calculators to model the difference that different interest rates make.
Explain how credit cards and store cards work. Discuss why they are so appealing.
Discussion could lead into the subject of credit ratings and how these either open or close doors to financial products.
Students could role play the scenario where the young person tells his or her parents about this debt.
It will help reinforce the importance of having a positive and responsible attitude to money as well as highlighting the social and personal issues related to money problems.
Lead a discussion into how students would deal with their own debt. Where would they go to for advice and assistance?
Curriculum Notes
Suitable for teaching Maths at KS3 and GCSE in England, Wales and Northern Ireland and National 4 and 5 in Scotland.
