Tips For Getting Rid of Your Credit Card Debt in Singapore
Despite it being one of the most common debts in Singapore, credit card debt is often a taboo topic that few people would admit they are suffering from. With everyone so intent on keeping up the appearance of financial prosperity, people suffering from credit card debt are forced to suffer in silence as they secretly struggle to pay off high interest debt that just won’t go away.
With pesky debts such as credit card debt, keeping up appearances sure can’t be easy. So, here are five tips from Double Ace Associates to make the road to being debt-free a lot shorter.
1. Calculate Time Needed to Pay Off Credit Card Debt Completely
Most Singaporeans who get themselves in the pit-hole of credit card debt often find themselves there due to carelessness on their part. As such, most people with credit card debt fail to calculate how much they would need to pay off each month and for how long they need to keep that consistency of repayment in order to be completely debt-free. As a result, most of them would end up repaying too little each month, causing the debt to balloon.
The most dangerous part about credit card debt is the high interest. By the time they realise they’re in trouble, the debt would have swelled to an amount that’s so overwhelming that they lose their sense of control.
Regardless of how high your debt is, it is important to calm down, take a deep breath and properly sit down to do the math. This is important in figuring out how long it would take you to pay off your debt in full. For example, if you were to pay $500 a month, do the math for a repayment rate of $1,000 a month, $1,500 a month and so on.
This fool-proof debt payment calculator is guaranteed to work, even if you failed your math in school. The crucial part is to remember to find out how much interest your bank is charging you and add it to the figure you’re paying at the end of each month.
Here's a simple way to break it down: If you’re in $10,000 worth of debt and your bank is charging 24% interest, you would take one year to pay off that debt if you consistently repay $1,000 a month. Vice versa, with $1,500 every month, you would clear your debt in 8 months. And if you manage to set aside $2,000 a month, you’ll be debt-free in 6 months.
With the knowledge of how much you need to pay each month in order to be debt-free 6, 12 or 18 months from the date you incurred your debt, you are able to better set a goal to put aside a certain amount each month instead of blindly paying “whatever you have on your hands”.
2. Scale Back Your Lifestyle
With the knowledge you’re equipped with now, you can finally know exactly when you can expect to be debt-free. If you actually manage to stick to your repayment plan, you would realise that there is hope in repaying high interest debts such as credit card debts.
The stricter you stick to your repayment plan, the faster you can pay off your debt and the shorter your time of suffering will be.
Take the previous scenario we discussed, for instance. To pay off $10,000 of debt in 6 months, you’d have to set aside $2,000 every month. This may seem like a huge amount to Singaporeans earning the average median income. However, if you manage to scale back your lifestyle, your debt would be repaid in full in 6 months. On the other hand, if you choose to pay only $1,000 a month, you’ll need to spend a whole year worrying.
Of course, how drastically you can scale back your lifestyle really depends on your circumstances. As a general rule of thumb, you should cut back as much as you humanly can without putting you and your family in danger. That means no vacations, no shopping except for what’s absolutely necessary, and eating at home as much as you possibly can.
3. Find Ways to Raise Your Cash Flow
Now that you have worked out how much you need to repay each month, and have already set your foot down to scale back your lifestyle for the next few months or years until your debt is repaid, what’s next?
What happens if your income does not permit you to repay a meaningful amount each month? If these are your circumstances, you might have to find ways to boost your monthly income until your debt is gone.
While we are aware that most Singaporeans work very long hours and may not be able to fit in a second or third job in their schedule, it is important to note that the faster you repay your debt, the faster you can stop the additional work you’re cramming into your life. Hence, depending on your stamina and working hours, it would be wise to try your hardest to dedicate some time to income-boosting activities.
For degree holders, one of the fastest ways is to source for tuition students who need an extra boost in their studies for their final exams. Creative types should definitely try to find freelance assignments for spare cash. Otherwise, you can also consider looking out for part-time or one-off assignments at roadshows and events.
If all else fails, Double Ace Associates provides our expertise on helping our debtor with difficulties regarding job seeking and we also help to refer our debtors to any relevant government agencies for further assistance.
4. Opt for Our Credit Counselling Service
While you may not be willing to tell people in your life about your credit card debt problems, do not discount the possibility of seeking credit counselling.
Double Ace Associates provides debt counselling services in the form of Informational Talks on Debt Management, Credit Counselling, our Debt Management Programme (DMP) and Education on Financial Issues.
5. Surround Yourself with People Who Will Help
Unfortunately, not all friends are necessarily positive influences. In fact, when you incur debt, you might want to stop to consider if the people around you might be indirectly responsible for your spending habits.
To prevent a repeat of having to incur credit card debt again, make sure you surround yourself only with those who are supportive of your road to debt repayment. This would mean no pressuring you to spend more than you should, especially during this very sensitive period.
This could also mean distancing yourself temporarily from friends who party only at expensive places, or rejecting a few wedding invites.
While you might feel like you’re missing out, on the bright side, you may get to rediscover cheap or free activities with other friends and family members by distancing yourself from these activities. Finding out the people who are willing to support you in your bid to downsize your lifestyle and vanquish your credit card debt in this process could also be a blessing in disguise.