Credit card debt is a common problem for many Filipinos. Ballooning debt is when the minimum payment is not enough to cover the interest, and the balance keeps increasing. This can quickly lead to a situation where the debt becomes difficult to repay.
However, with the right strategies, you can pay off your ballooned credit card debt and regain financial stability.
What are the tips to clear a credit card debt?
Here are some tips that can help you achieve this goal:
Prioritize paying off your highest-interest credit card first
Paying off your highest-interest credit card first will help you save money on interest charges in the long run.
Consolidate your debt
This involves combining multiple credit card balances into one loan with a lower interest rate. This will make it easier to manage your debt and pay it off faster.
You can use the credit-to-cash feature of one of your credit cards that offer a low monthly interest rate (at least 1% or even less) for a 1-3 year payment term. Then using the cash, pay off all your credit card debts. That is if the loaned amount is enough to cover all of them. Else, at least pay your other credit cards in full.
Create a budget
Take a close look at your expenses and see where you can cut back. This will give you more money to put towards paying off your debt.
Use the snowball method
Start by paying off your smallest debt first and then work your way up to the largest. This can help you build momentum and keep you motivated as you make progress.
Pay more than the minimum payment
The minimum payment is designed to keep you in debt for as long as possible. By making larger payments, you can reduce the amount of interest you pay and get out of debt faster.
Get extra income
Consider getting a side job or freelance work. Kung di kaya ng side hustle, OT is an option. This can give you extra income to put towards paying off your debt.
Be disciplined with your spending
Avoid using your credit cards until your debt is paid off, and try to live within your means. Bawas samgyup at kumain sa bahay. Or iwas Starbucks at mag 3-in-1 na muna. Mahirap pero kelangan.
Transfer your debt to a new credit card
Applying for another credit card with a 0% interest balance transfer offer can be an effective strategy for paying off ballooned credit card debt.
Almost all credit card companies offer a “0% balance transfer”. This is a promo wherein you can ask your new card issuer to pay off your outstanding debt on your older card without any added interest and have it on a 12 to a 36-month installment plan. So this could zero out your current debt to avoid that hefty monthly interest for the unpaid balance PLUS it won’t be heavy on your budget since you get to pay it off in 1-3 years.
Personal Experience
I mentioned in a previous blog post that I incurred heavy debts on credit cards due to mismanaged expenses. My card debt was so terrible that it reached a point wherein I was paying more than 3K worth of interest per month. Tapos ang sweldo ko lang eh di pa umaabot ng 30K? Kamusta naman yan?
Oh don’t get me wrong, I still have credit card debts until now. I am currently paying monthly amortization which would take about 2 years to clear. The good news though is that I’m now able to pay in full whatever amount is shown in my statement balance each month. This is in contrast to my situation a year ago wherein, on top of a monthly amortization, I’m unable to pay the full statement balance which then gets rolled to the next bill and the next.
Except for “getting extra income” kasi di kaya ng katawang lupa ko ang mag OT, those are the things that I did to manage my credit card debts.