Credit Card IVA

Introduction to Credit Card IVA

Once you agree to an IVA – Independent Voluntary Arrangement – the way you normally use your money will change considerably. As part of the agreement you will be making just one payment per month and this will be distributed amongst your creditors. There are many advantages of taking out this sort of agreement such as the fact that you will not pay any more interest and your debt could be reduced by up to 70%.

The downside is the effect it will have on your credit rating. You could be completely debt free in 5 years, but there will be a record of this for at least 6 years. You will not have the same amount of freedom of how you spend your own money and you will have to notify the agency as soon as there is a change in circumstance. Additional money you get may have to be paid off so there is no chance of putting together a nest egg.



The IVA and Your Credit Card

Most people who have an IVA will not be eligible to use a credit card. It would not be right for you to have most of your debt written off with one company, whilst racking up another large bill with another. This will be part of the agreement and will apply to the cards you already have, and also stop you applying for new cards with new companies. There are however some exceptions to this but as with all things concerning an IVA there will be strict guidelines.

If you are self employed and need a credit card to keep your business going, you will be able to use it while you are paying off the IVA. This will be on the understanding that it will be paid off in full at the end of each month. This works along the same lines of it not being possible to have tools or work equipment taken by bailiffs. The agreement will not do anything that will stop you earning money as they realise that this will stop you paying each month.

It may appear that this is an unfair condition and could lead to hardship at a time when you are already struggling financially, but when the IVA is put together, discussions will take place regarding the amount of money you will need to get you through the month. This is helpful in many ways, but you then lose the benefits of paying by credit card. It is so easy to do the grocery shopping without having to find a cash point first. There is now a new type of card that can solve this problem and they are widely available.

Is There A Solution?

There are now pre paid credit cards that work in very much the same way as debit cards. It works by using money that is already there rather than building up a debt to be paid off at a later date. They are accepted in just the same way as a credit card, and it is good news that they their use is allowed under the terms of IVAs.

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