Credit Card – it had becomes part of the modern lifestyle. It is undeniable that it is so convenient to just swipe away and worry about the bill later. You just can't stop swiping the card on clothes, food, entertainment, pub and you just can't resist the temptation. However, spending recklessly without you realizing will make you fall into the trap of credit card debt, especially the young working adults nowadays. They think that they will settle their debt once they have graduate by securing a high-pay job. Besides, with the cost of living continue to rise and income still the same, Malaysian are forced to spend more than their earning.If you want to know whether if you fall into credit card debt, check the list below before you get into really deep hole.
a) Always Swipe Now, Pay LaterYou always use the credit card to swipe when you purchase. Without you realize, you have already overspent. When you get your monthly statement, then only you find out but you can't afford to pay in full amount.
b) Making Minimum Payment 
When you only make the minimum payment or 5% of your outstanding balance, is a big NO NO. You only let the interest charge on your outstanding balance month by month and before you know it, the balance is slowly increased. It will take you years to settle all your outstanding debt.
c) Cash Advance
Are you always withdrawing cash from your credit card via ATM machine? If yes, you need to stop it right now. Do you know that the fee charge on cash advance withdrawal is between 4.5% - 5% or RM15 – RM20 per transaction whichever is higher? (Depending on which issuer bank) It is much higher than the finance charges – 1.5% per month or 18% per annum.
d) Living Paycheck To Paycheck
Are you always living solely based on your salary without any balance left behind? Are you constantly felt that the money you have earned is not enough to cover your expenses and thus you withdraw money from your credit card? You just felt that you have a lot of necessary items to purchase.
e) Poor Money Management
You always have no idea where your money has gone to. You may be spending too much on unnecessary item and you have also need to spend the money on things you should ay the same time.
f) No/Little Saving
You found out that you always did not save some of your disposable income into saving account or that you don’t have enough money to save it.
When you only make the minimum payment or 5% of your outstanding balance, is a big NO NO. You only let the interest charge on your outstanding balance month by month and before you know it, the balance is slowly increased. It will take you years to settle all your outstanding debt.
c) Cash Advance
Are you always withdrawing cash from your credit card via ATM machine? If yes, you need to stop it right now. Do you know that the fee charge on cash advance withdrawal is between 4.5% - 5% or RM15 – RM20 per transaction whichever is higher? (Depending on which issuer bank) It is much higher than the finance charges – 1.5% per month or 18% per annum.
d) Living Paycheck To Paycheck
Are you always living solely based on your salary without any balance left behind? Are you constantly felt that the money you have earned is not enough to cover your expenses and thus you withdraw money from your credit card? You just felt that you have a lot of necessary items to purchase.
e) Poor Money Management
You always have no idea where your money has gone to. You may be spending too much on unnecessary item and you have also need to spend the money on things you should ay the same time.
f) No/Little Saving
You found out that you always did not save some of your disposable income into saving account or that you don’t have enough money to save it.
If you have checked all the list above, you need to start planning on how to clear off your debt. However, if you did not, well, good luck to you. There is a saying that ‘It is always better to be safe than sorry’. Here are some tips on how to prevent from falling into credit card debts.
a) Stop Charging All Items on Your Credit CardYou really need to stop charging all your purchases on your credit card. It is advisable that you use cash or debit card to pay your bills and expenses and leave your credit cards at home. If you really need to use your credit card, charge only when you know that you are afford to pay it back next month.
b) Pay The Full Amount
It is good to pay the full amount or at least more than the minimum payment so that they will be no accumulated interest or lesser interest is charged on your outstanding balance. Thus, we will not become the servant of credit card instead the other way round.
c) Transfer Balance
Analyze your credit card debt and determine which credit card issuer are charging the highest rate of interest. Then, transfer the balance from the highest rate card to the lower rates. Next, pay the cards with your disposable income as much as possible until you finally paid it off.
d) Keep Only One or Two Cards
After you have paid off the debts, now destroy the cards or cancel it. Keep only one or two cards as the financial tools and emergency use. Still, it is better if you do not withdraw cash from your credit card. Remember, credit card is not free money and don’t repeat the same mistakes again.
e) Prepare A Good Personal Financial Planning
When your have received your paycheck, plan accordingly on how you going to spend your money. It is advisable if you can record down what you have spent every day. From there, you will know where you have spent your money on. Then, you can cut down any unnecessary items.
Analyze your credit card debt and determine which credit card issuer are charging the highest rate of interest. Then, transfer the balance from the highest rate card to the lower rates. Next, pay the cards with your disposable income as much as possible until you finally paid it off.
d) Keep Only One or Two Cards
After you have paid off the debts, now destroy the cards or cancel it. Keep only one or two cards as the financial tools and emergency use. Still, it is better if you do not withdraw cash from your credit card. Remember, credit card is not free money and don’t repeat the same mistakes again.
e) Prepare A Good Personal Financial Planning
When your have received your paycheck, plan accordingly on how you going to spend your money. It is advisable if you can record down what you have spent every day. From there, you will know where you have spent your money on. Then, you can cut down any unnecessary items.
f) Save Some MoneySave some money every month from your salary. You will see that your saving account money is slowly growing more. You may also deposit your money into fixed deposit account and it can controls you from withdraw cash whenever you have the urge to spend on other unnecessary things.
If you still can't manage your debt, you may seek counselling from Agensi Kaunseling dan Pengurusan Kredit (AKPK). It is an agency set up by the Bank Negara Malaysia to provide financial education, credit counselling and debt restructuring services to individuals. All services offered by AKPK are free of charge. For further information, visit their website at http://www.akpk.org.my/ or call toll free number 1-800-88-2575.
*by Oi Ming*
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2 comments:
i personally feel that, credit card won't really affect me. because i will use it only when i have the money. it's not really a cash advance for myself... if i know i dun have money, i won't use it. Using credit card is just helping to earn points, get some benefit from the credit card... and sometime when i forgot to bring enuf cash (normally i dun bring sufficient cash.. no money hahaha)
hmm. tat's because you have a good discipline. if every one think like you do, guess people in this world will not have debts or bankrupt and most of all the bank can't earn money from you. haha... but anyway, i think it is better to be safe than sorry.
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