Bye-Bye HSBC!

I’m officially out of my credit card debt! No, I did not use my personal money to pay for it. I got a salary loan from SSS (my first time, actually) and made a comparison using three scenarios.

Okay, so my HSBC card’s outstanding balance is around 30,000 pesos. My goal for 2013 is to zero it. Heck, a 3.5% interest per month on my outstanding balance is just TOO MUCH! I want to stop being a “revolver.” I learned a lot from this credit card debt.
I compared the three possible sources of my fund.

Bye-bye HSBC!

Bye-bye HSBC!

Scenario A, If I am going to avail of an SSS loan worth PhP 30,000, I will be able to zero out my credit card debt and pay the monthly amortization at PhP 1,385 for two years. At the end of the 24th month, I would have paid PhP33, 240 and the total interest paid would be PhP 3,240.

Scenario B, if I’m going to pay the same amount (PhP1,385) to HSBC, I would finish my obligation in 38 months and the total amount paid would have been PhP52, 630! The total interest paid would have been PhP22, 630!

Scenario C, if I will continue paying PhP2,500 per month, I would be debt-free in 15 months but the total amount paid to HSBC would have been PhP37,500. The total interest paid would be PhP7,500.

I picked Scenario A because of the following reasons:
1. I’d like to take advantage of SSS’ low interest rate. I wouldn’t feel the PhP692.5 deduction every payday.
2. I am not willing to pay PhP30,000 upfront. Hello, I can smell the holidays! I don’t want to use my credit card for the holidays. It’s either I won’t spend too much or I won’t spend a single centavo at all. Lol!

What about you, what is your credit card story?

Credit Card

I have the intention to pay my credit card debt in six months. I was able to do it in 2010 when I decided to cut my Mabuhay Miles credit card. It felt good then to get rid of those high monthly interest rates. A year later, who would have thought that my remaining credit card would be my source of headache? It started with a credit card debt that was manageable until I fell again into my habit of not inspecting the monthly billing statement.

The billing statement reflects the cut off date, payment due date and minimum payment requirement. Ideally, if one wants to avoid finance charges or interests, he must pay his credit card balance in full. I SHOULD have done that a year ago. Credit cards could be alluring and tempting to use during the holidays and sale. The more you use your credit card, the more debts pile up. If you are just paying the minimum monthly payment which is 4% of your outstanding balance, then you’re doomed to pay forever!

I got into a trap of just paying the minimum monthly payment because I preferred my money to be kept in the bank. In the long run, the 3.5% interest per month on my Red Card (HSBC) is robbing off my potential savings! Heck, banks just give us a 2% interest rate per ANNUM for savings account. Two percent versus 42% per annum, then I’m losing 40% of my potential savings on interest rate!

My plan is to pay 20% of my outstanding balance by the end of August 2012. The goal is to reduce my outstanding balance by 20% so that my minimum monthly payment will be reduced. From there, I will pay above my minimum monthly payment until my outstanding balance settles to a figure that I’m comfortable to pay in full.

I’m tempted to balance transfer my HSBC credit card to BDO but I’m afraid of hidden charges and penalties. It took me five years to realize some of the basic things about my credit card and transferring to another organization with different sets of rules might do more harm than good to me.

I Cut My Mabuhay Miles Credit Card!

I called up HSBC customer service to inform the company that I have the intention of cutting my Mabuhay Miles Credit Card. Thank God, I was able to pay off in full my credit card debt last Wednesday, March 24. I still maintain my HSBC Red Card though.

What turned me off in using my credit card is its high interest rate. For HSBC, they claimed that its 3.5% per month or 42% per annum. When I computed, it was actually 4% per month or 48% per annum. If you’re just paying the minimum amount due per month, then you’re doomed to get buried in a huge credit card debt.

Credit card per se is actually not evil; it’s our ignorance of how the credit card system works that becomes the culprit of our huge credit card debt.

I am happy with just one card left. I learned my lesson never to pay just the minimum amount due per month; as much as possible, pay it in full. 🙂

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.