5 tips to get rid of your credit card debt

By Randell Tiongson on August 27th, 2017

QUESTION: Because of emergency and other unforeseen expenses, I have racked up credit card debt. I hate the feeling of having debt. It scares me that I may never be able to pay them down, and the interest rates are discouraging. I would love to get some tips from you on how I can pay down my debt. Thank you so much for your help. – Johnny via e-mail

Answer: Ah yes, when you have credit card debt, it can feel like there’s a heavy weight on your shoulders. You want to do a number of things, but you can’t because you’re always thinking about the debt you have. It feels hard to relax when you pay more on interest month per month. Eradicating credit card debt will take a heavy weight off your shoulders. If you’re up to neck in debt, here are 5 easy tips to get out of credit card debt:

  1. Use the snowball method

The snowball method is a method used to tackle debt by attacking your credit card with the smallest balance first. Just as a snowball is rolled and piled together to create a bigger snowball, the snowball debt method lets you start with the smallest balance to give you the confidence to attack bigger balances in the future. Paying off the smallest balance will make it easier and faster for you to pay down debt. For those who are new to saving and budgeting, starting small (read: paying the smallest balances first) will ease you into the habit of paying debt. If you start big and pay off the biggest balance with the highest interest rate first, this can shock you and make you feel like you’re not making any progress and you might fall back into the trap of accumulating more debt.

 

  1. Automate payments

“Out of sight, out of mind” right? If you set up your account, so that your credit card dues will be automatically debited from your bank account, you’ll treat the money as if you never had it at all. If you choose to pay your credit card balance manually, you may be tempted to pay the minimum balance only to give way to other expenses you prioritize. By automating your credit card payments, you’ll feel like you didn’t even have the money in the first place. Even better is that you’re paying the full balance each month, which avoids extra fees. Multiple banks, such as BDO, BPI and HSBC, offer this auto-payment service. Just log on to your online account to apply.

  1. Track your expenses

A lot of people get into credit card debt because they treat it as free money. It’s easy to hand that plastic to the register, swipe it, then sign. Until the billing statement comes. Then, you find yourself searching every corner of your home for spare change to pay your balance. By tracking your expenses (pro tip: have a separate category for credit card expenses), you’ll see where your money is going, and you’ll realize just how much you’ve racked up in purchases using your credit card. Tracking your expenses avoids adding to the debt you already have. Multiple phone applications, such as Expense Manager, Mint and You Need a Budget, allow you to track your expenses in a comprehensive manner (e.g. by timeline, by category, current balance, etc.).

  1. Transfer balances

Multiple banks provide this service of transferring and consolidating all your credit card debt into one bank. To get the most out of balance transfers, transfer all your balances to the bank that offers the lowest interest. This way you’ll be paying less in interest, which can save you a lot. Late fees for credit card dues start at around 3 percent a MONTH, so it’s best to avoid sky-high interest rates as much as possible. By transferring your balance from one account with a high-interest rate to the one with the lowest, just imagine how much you can save. It’s best to remember that there’s no such thing as free money and the interest rates on credit cards will make you wish you never had a credit card in the first place.

  1. Use a part of your savings

Have an emergency fund, it’s one of the basics of personal finance. This e-fund must be used ONLY for emergencies, nothing less; however some rules can be broken. If your e-fund is well-padded, if you have a continuous flow of income, if you have a partner that has his or her own income and emergency fund, if you have investments, THEN you can use a portion of your emergency fund to make a lump sum payment. Remember that in a savings account, you only earn 0.25 percent in interest a year, humiliatingly less than the 3 percent a month you pay in credit card interest. Consider using a portion of your savings to pay your debt down faster and avoid incurring the 3-percent interest a month.

Road to financial freedom

It’s a different feeling when you don’t have to worry about debt. You don’t feel like you have a rope tied around your neck. You feel like you’re able to save and invest earlier and faster. Having zero debt maximizes your opportunity to live a life free of worries. That portion of your income you used to pay down debt? Use that money to go on a much-needed vacation that is not funded by debt. Even better, use the money to start investing, saving for a house down payment, or whatever financial goals you may have. The bottom-line is once you pay down all your credit card debt, you’re on the fast track to reach a life free of money worries.


“The rich rules over the poor, and the borrower is the slave of the lender.” – Proverbs 22:7, ESV

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Relief from the burden of debt

By Randell Tiongson on July 16th, 2017

Debt is something that robs a lot of people of hope. According to Hal Lindsey, “Man can live about forty days without food, about three days without water, about eight minutes without air…but only for one second without hope.” Simply put, debt puts a peso sign on how much of your future you spent in the past.

After going through a debt problem myself for the many years of my adult life and eventually being free from its clutches, I made it a point to  spend so much time telling others to get out of debt or at least manage their debt properly.

I have said time and time again the Bible is the best resource for wisdom on personal finance, among many others. But here is a huge “news flash” for you: With over 1,300 passages on wealth, the Bible is virtually silent on debt, at least to the borrower. Only ½ of one proverb tells us, “… the borrower is slave to the lender” (Proverbs 22:7). Since no one wants to be a slave, enough said. How do you get out of debt? Simply put, you need to be a good steward of your finances. You may want to read my other posts on debt or pick up my book No Nonsense Personal Finance, there is a chapter there dedicated on getting out of debt.

The Bible, however, has considerably more to say to the lender, such as those whom have been entrusted with money are instructed to use it mercifully. Nothing drives this home like Jesus’ parable about the servant who, after being forgiven a fortune by the king, fails to pass that same mercy on to another servant. Instead, he chokes him and throws him into prison for a relatively minor debt (Matthew 18:21-25). Jesus tells this parable to Peter, who like us, probably thought he was being surprisingly generous by offering to forgive his brother up to seven times. But Jesus makes it very clear that this is just the start. Jesus’ teaching echoes many other encounters people had with him, like the woman who, having lived a life of sin, came to him at a Pharisee’s house and wet his feet with her tears, then kissed them and wiped them with her hair (Luke 7:36-48). Her response to Jesus was the exact opposite of the inhospitable Pharisee, who offered no welcome to his guest. Why? Because the one who has been forgiven little loves little. But the one who has been forgiven much loves much.

Where does that leave us? If you are a lender, them you need to be merciful. If you are a borrower, you need to be wiser.

So what if you’re one of the millions of people who are trapped by debt? I have great news for you. God, not money, is still your master.

Money might dictate when you serve, or where you serve, but it can never dictate who you serve.

Whatever your financial position, find comfort in this: “…the Lord will reward everyone for whatever good they do, whether … slave or free” (Ephesians 6:8).


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Did You Really Save On That Seat Sale Flight?

By Randell Tiongson on July 28th, 2016

Most Filipinos are always on the lookout for seat sales because it’s an affordable way to go abroad. Who wouldn’t be tempted? A ticket from Manila to Cebu can cost up to Php4,488.76 for a regular flight but can cost as low as Php402 when booked through a seat sale. That’s a total of Php 4,086.76 in savings.

This will be applicable in the near future because most of us will be booking our seat sales for the upcoming holiday season. Most airlines are releasing their seat sale promos as early as now to entice people to book their flights.

cebupacific-airlines-key-destinations

What most people fail to realize is that one can save on all aspects of the trip. There are many reasons that one can still overspend during the trip because of the emphasis that they already saved on the airfare. Some reasons can also be overlooked because it doesn’t seem it was an opportunity to overspend, but in reality, people spent more than they should have.

Here are the instances you spent more than you should on a seat sale trip:

You did not save on the other aspects of the trip.

Were you able to book discounts for your hotel or hostel? Did you get a group discount for tours during the trip? There are a lot more expenses in the trip that you can get discounts for. Some hotels offer big discounts when they are filling out accommodations in the building. One example is 27% off at Dorsett Mongkok in Hong Kong during summer because the hotel is filling out accommodations in the 27th floor of the building.

Your credit card incurred interest.

If you paid for your seat sale ticket through a credit card and got an interest charge from the bank due to late payments, you will incur additional expenses. The amount may seem insignificant since monthly interest rates on credit cards are usually 3-4%, but this would still equate to lost money no matter how small the amount is.

You extended your trip because the cheaper seats are pegged during weekdays.

A longer vacation due to finding slots for cheaper airfare can equate to having more expenses with a longer travel time. This includes accommodation, fees for activities, and food.

The travel dates that you’ve taken will be non-paid leaves.

“If you are taking a non-paid leave from your full-time job for the trip, you end up losing money,” says Kristine Cenidoza, an HR professional who loves to travel. For example, with a daily rate of Php1,000.00 for an employee and booking a flight out during a Thursday morning, that could equate to Php2,000.00 if those leaves are not paid and you shelled out Php402 for the airfare.

Final Thoughts

Overspending can be avoided through proper planning. Think a lot first before doing impulse buying on seat sale flights. This should make you free from worry and make you enjoy your vacation more instead of getting buyer’s remorse after the trip.

Plan trips properly and always remember that balance is key. Why enjoy today and suffer tomorrow? Budget your money well. If you have properly saved up for a trip and that trip will not cause financial turmoil, then go and enjoy that vacation you have always wanted. As with anything related to personal finance, wisdom is key.

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