Credit Card Debt

Tell me of the best credit card company. HSBC? Citibank? Metrobankcard? There is no best credit card company unless you have the capacity to pay what you used.

I had my first credit card in 2007. Quite a latebloomer, I was so excited and “honored” to own one. My first expense using my HSBC Red card was just a snack in Mc Donald’s. It costed me around PhP 200.00. Cheap, isn’t it? I just wanted to check if my credit card was already “online.”

I bought my first laptop in December 2007, 40% of the payment came from my HSBC Red Card. The minimum monthly payment was tolerable; I had a solid cash flow and I could still save a little portion in the bank. I used my Mabuhay Miles to buy a digicam in October 2008. With two cards, I could still pay above the minimum monthly payment.

When 2009 came, the additional expenses were unforecasted. Instead of my usual practice of paying above the minimum monthly payment, I settled at the minimum. But the minimum monthly payment barely covered the montly interest rate; my credit card debt got bigger and bigger every month. To add to my self-made misfortune, I realized that my credit card debt nearly reached PhP100,000 only in November 2009!

It was on the same month when I chanced upon Francico Colayco’s bestseller book, “Pera Mo, Palaguin Mo” in SM. According to Colayco, credit card debt is the most expensive debt because they charge an interest rate of 3.5% per month or 42% per year. What happens if you’re only paying the minimum? You are only paying for the monthly interest and the credit card company computes for another 3.5% on your remaining balance for the next month’s billing statement.

I made a wrong financial decision when I least prioritized my credit card debt in 2009. I could have paid my two credit card debts in March 2009 but I opted for a solid cash flow instead of a little cash flow but zero credit card debt. Wrong move!

I called up HSBC in December 2009 to ask if they have an installment program. The agent said that they don’t have an existing program. Okay,fine!

I computed my cash flow. Colayco said that Income Less Savings = Expense. Which means to say that saving must come first before spending. I computed our monthly budget and realized that if I could raise my monthly credit card payment to xxx amount. I targetted June 2010 to pay all of my credit card debts.

Today is March 2010 and I have three more months to go. I realized two important things:
1. To check my monthly billing statement. (I used to take this for granted)
2. Never spend what you can’t pay for in two months time.