Financial Idiots - Cutting Credit Card Debts

These plastic moneys thing could either make you broke or even go bankrupt. When you are in the trap, just coming up with enough to meet your minimum monthly payments on credit cards debts can push you to the limit.




But, do you really need their service? It might even bring more woes than help to you.



I have been in that situation before about two years ago. This is not because I spent using the credit cards like nobody's business. I got to use it to pay for my mom's operation charges which cost a bomb (not C4 lah) and to pay for my air fares, accommodation and etc for my trip to France/Holland. Well, we only have one life, why not enjoy it, right? [ enjoy 1st, suffer later :( ] However, I managed to pay it off in less than a year.




Well, I'm sure many of you have read from the financial magazines or internet on managing one's credit cards debts. Anyway, let's take this D-I-Y some sort like a revision... okay.


Step 1: Prioritize your monthly expenses

The first thing, scrutinize your bills and decide which ones are the most important and follow by the rest. Monthly living expenses like rent, utilities and car installment are mostly non-negotiable, although luxuries like eating at fancy restaurants and buying branded cloths are candidates for cutting. By cutting down on those luxuries spending or the unnecessary ones will help you to pay off credit card debts faster.


Step 2: Negotiate with your bankers

If your banks keep bothering you, you probably want to talk to them on the following:

• To lower down the interest charges
• For better deals, consider the balance transfers if you own credit cards issued by other banks.

But be aware, many banks charge one-time balance transfer fees (ranges from Rm30 to RM50 per balance transfer application or of up to certain % of the amount transferred).

You can download this simple interest charges calculation spreadsheet to choose which banks offer the best deal. Please click here.


Step 3: Snowball

Always make the minimum payments for each of your credit cards to avoid the late penalty charges (every penny counts). After you have made the minimum payments, take whatever left and apply it to your highest-priority debts. If you still have some money left, use it to pay off the remaining credit card debts starting with the ones with the lowest outstanding balance or highest interest rate.

The idea is called snowballing, because as you pay down your debt slowly, month after month, your progress will get faster and faster. Every extra dollar you pay means less in interest charges, letting you put that additional savings toward debt reduction. When that first card is paid off, it's one less minimum payment you have to make, so you'll be able to pay off your second card faster.


Step 4: Maintain

Try not using your credit cards when you do your usual marketing like buying groceries, fuel up your car, etc. But if you need to, make sure you don't overspend it! Please do some budgeting, this would help you to spend your monthly disposal income wisely.

Inevitably, some unexpected expense may threaten your plans. But don't panic. A financial emergency may set you back for a little while, but nothing can stop you from eventually getting yourself out of debt.


So, you are planning to buy an ipod but no more money left? I'm willing to donate this 'KFC-pod radio receiver' out, any taker? hah hah