How to get out of credit card debts !
Easy credit has made so many people got used to the idea of spend first and pay later. Enjoy now and suffer later. It is common to have people paying for stuff like new hand phones, holiday trips, stylish wedding photos, branded watches, fine dinning, Flat screen TVs and other household appliances using the ubiquitous credit cards. The best of way getting out of debts is of course not getting into it in the first place. Simple said then done right ?
The ‘Revolutionary’ idea is …. (drum roll…..)
When I really need a new hand phone, I will have to ask myself first the question “Do I have the cash to pay for it now ?” If I do not have enough of cash, then I will need to make do with the old junk until I have the cash. How to reduce outstanding credit card debts ? The strategy I would use would be ….
Step 1
I will work out the amount of cash I need to survive for the month. This amount can include a bit of entertainment money. The idea is to do a budget, rather than torturing myself. Then I will set aside the amount from my pay cheque and the balance all goes into the outstanding credit card loans.
Step 2
Add up all the debts from all the credit cards, the total amount will give me some perspective on the magnitude of the situation. Bursting the credit limit of one Gold Card usually means RM10,000 and a platinum means RM20,000, 2 Gold cards and a Platinum means RM40,000. If this amount is a shocker to me .. then it may just save me from bursting another card. But don’t fret! Be cool about it.
Step 3
Work out how long I need to settle all the debts, if I were to follow step One (above) diligently. Is it 6 months? It is 12 months? Is it 2 years? Is it 3 years ?. If the time required to payback is a shocker to me … then it is also a good lesson to me. But don’t fret! Be cool about it.
Step 4
Redeem all loyaty points if the amount is significant, and cancel all the current cards; stop the bleed. Before that, apply for new cards with balance transfer facilities that offer very low interest rate / processing fee. Transfer all the balance into these cards. This will …
b) help me to have an installment scheme to discipline myself to pay them every month, before I spend on other things. That means, I will be paying off my debts first before I start spending my cash.
a) car insurance, b) handphone, c) Astro, d) gym subscription, e) credit card installment
I will probably ranking them in terms of priority, 1 being the most important, 5 being the least important.
See ! By putting everything into auto debit will inadvertently make me pay for things indiscriminately. If I need to take out the purse or write a cheque each time I pay, I will be more conscious of how much money is leaving me, how much I have left in the purse or in the bank.
b) All unexpected income such as ‘ang pow’, money picked up from the street or while cleaning the sofa will have to be banked into the credit card loan account.
The conclusion is, I will need to …
Consolidate the debts
Cut the plastics to stop the bleed
Pay back systematically & relentlessly
Use cash and cheque only
Find extra sources of income
Please check out the youtube video clip below : http://www.youtube.com/watch?v=cmAm8GNJ_IA The above steps are only suggestions, each person’s situation is unique and if you need assistance to get you out of your debts, you can contact the BNM Agency below :Agensi Kaunsiling and Pengurusan Kredit (AKPK) - Credit Counseling and Debt Management Agency
Website : http://www.akpk.org.my
AKPK is an organisation appointed by BNM, to help counsel people with debt problems and provide advice on money management and budgeting. They will work with you to develop personalised debt repayment plans with your financial service providers. (Their services are free.)