Credit card – being one of the main contributors to increase household debt among Malaysians have become an obvious debt trap. Many are struggling to escape their credit card debt and have mostly failed to come out of it being debt-free soonest possible.
As we seek for the best advice to help us reducing our debts, we tend to get overwhelmed by the amount of information accessible to us. There are many tips and advice on ways to clear off debts from personal finance blogs you’re reading to those given by your friends or family members. This load of information might lead to confusion and you’ll end up not getting the much needed advise you’ve been searching for.
However, we believe that if you’re following the right advice and are willing to make major changes to your financial situation, being debt-free is a possibility worth striving for. Check out our five best ways to paying off your credit card debts and learn how you could apply them on to your monthly financial arrangements.
Cut down your multiple credit cards to one – If you have more than one credit card, it’s time to thrash away the rest and stick to only one. Knowing that you don’t have as many credit card as you initially do will decrease your dependence on the other cards hence stopping you from spending more than you should each month.
Pay more than the minimum – If you have the habit of paying only the minimum required each month, you’re not going to make any progress at clearing off your credit card debt anytime soon. With the usual minimum rate being around 2% to 3% of the outstanding balance, minimum payment commitment will only prolongs your struggle. Always remember, this is the thing the banks want you to do – taking longer time to repay the charges hence allowing them to make more money on higher interest. You’re basically at the losing end if you keep on paying the minimum. There’s definitely no better time than now to start strategising, even that requires some major sacrifices on your monthly financial plan to meet this needs.
Do a balance transfer – If you begin to rack up debt on a high-interest credit card, transferring the outstanding balance to another card with a lower interest rate through the process called balance transfer could be one of the wisest things to do. Balance transfers could help you pay less as many banks or credit card issuers offer a 0% period on balance transfer that could save you a lot of money on interest alone. It’s one way to clear existing debts and allow you to organise your finances by combining all of your outstanding balances into one.
Use the Snowball Method – The debt-snowball method popularised by financial advisor Dave Ramsey suggests paying off credit cards in order of lowest balance to highest balance, regardless of interest rate. This method allows you to pay off small credit cards quickly, giving you that much-needed motivational boost that will fuel the rest of your debt payoff plan.
Use your savings – Say your debt is already overwhelming and it seems impossible to fork out your monthly earning to clear the debt off, you might want to look at the option of using your savings for debt reduction. We are not suggesting for you to make use of your entire savings and leave it completely dry but instead we highly recommend having at least RM 1,000 of emergency fund out of the savings that you could utilise.
CompareHero is the leading Malaysian financial comparison platform, aimed at helping Malaysians save time and money. Visit CompareHero here.
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