It’s not always easy to tell who’s in credit card debt. Of all the people I know who’ve at some point or other struggled to repay five figure sums on their credit cards, there’ve been well-paid bankers who had spent a little too much partying, family men who were proud fathers and civil servants with an iron rice bowl. All these people were the very picture of prosperity.
Credit card debt is an increasing problem in Singapore, and it’s hitting many people who are decently paid but have been careless with their money or are living above their means.
As you’ll know if you’ve ever carried a balance on your credit card, each month you fail to pay your bill, it gets harder to do so the next, as the interest you pay on credit card debt hovers at a very high 25%–and this interest compounds, which means every month you need to pay interest on the money you owe plus interest on the interest accumulated to that point… phew.
So what can you do if you’re in credit card debt but the sum has swelled to the point where you can’t pay it all off in one month?
Accept that you cannot continue to lead your usual lifestyle until you pay off all your debt
One big mistake people make that really shoots them in the foot is thinking they can continue to live their lives as usual, paying their credit card debt with whatever money is leftover at the end of the month.
The problem, of course, is that credit card debt can grow at an alarming rate if you let it. If your current lifestyle doesn’t allow you to pay off that debt fast enough, you will find the amount swelling each month until it finally crushes you.
Anyone in credit card debt needs to scale back their lifestyle as much as possible until the debt is paid off in full.
You might not want to starve yourself in order to save up for a car, but credit card debt is a special case due to the astronomic interest rates being charged.
If you can conceivably pay everything off in one month by eating only instant noodles, it’s time to stock your shopping cart with Maggi.
Don’t congratulate ourself on paying only the minimum payment
Many people get tricked by the comforting wording of the phrase “minimum payment”, thinking that if they can pay that sum it means they’re doing great, because they’ve met the minimum standards and any extra they pay is a bonus.
In actual fact, if you make just the minimum payment, the only favour you’ve done yourself is avoiding being slapped with non-payment charge by the bank.
It doesn’t mean that you’re successfully paying off your debt, nor does it mean you aren’t still paying exorbitant interest on the money still owing. Your goal should be to pay back every cent as soon as you humanly can.
You probably need to increase your income and/or lower your spending
Unless it’s due to a huge, one-time emergency that even your emergency fund couldn’t cushion you from, carrying a credit card balance you can’t pay off is a sign that you’re living above your means.
You will need to increase your income and/or lower your spending at least until the debt is paid off, and after that you probably want to implement some of these changes permanently.
Increasing your income doesn’t necessarily have to come in the form of a new job. You could take up a side gig like giving tuition in the evenings, do weekend assignments like working at roadshows or sell unwanted items on Carousell.
For most, lowering your spending will the be most obvious step to take, which means no shopping unless your life depends on it and eating all meals at home.
After your debt is paid off, don’t be too quick to bounce back to your previous way of life if that was what caused you to get into debt in the first place.
Call everyone who can help
Credit card debt tends to be viewed as deeply shameful in Singapore, and many people in debt continue to maintain their lavish facades so they don’t lose face.
But keeping this secret so closely guarded often prevents people from reaching out to those who can help.
By “those who can help”, I don’t mean your neighbourhood ah long. Instead, try speaking directly to the bank that’s issued you the credit card to request for a lower interest rate.
While the bank certainly wants to earn your money, they don’t want you to go bankrupt, and are quite likely to accede to your request if it’s the first time you’re asking.
If you’re having serious trouble paying off your debt, swallow your pride and call up Credit Counselling Singapore, who can help you to work out how to pay off the debt without going bankrupt.
Have you ever been in credit card debt? Tell us how you managed to save yourself in the comments!