Tuesday, December 11, 2012

Real emergency or self-created emergency?

Credit card. Is it a payment medium or credit facilities?

Often we heard excuses given by people who applied for 2nd or 3rd credit card, "I need it for emergency cases". But have we ever asked ourselves what is the real definition of emergency? Car broke down and requires big repair before salary comes in or Isetan member's sale where every stuff are having 50% discount?

I have a confession to make. I used to hold 4 credit card with pretty good credit limit and it brought me to a dark phase. You see, I am those person who cant hold my back once I see pretty good deals on the internet especially when it comes to travelling. There was a year where I travelled to 4 different countries in 8 month time and I was having a blast. Not so much when I received the statement.

At one time, my accumulated debt stood at RM25k, enough for the country to declare 'bankcrupt' on me should I fail to pay the required amount (i.e 5% of total outstanding per month) for 3 consecutive months. That was the time when my panic button was pushed, not by any other person but my self.

By having that kind of o/s at a time, you end up paying more than what you owe. By not being a transactor, you end up paying 1.85% interest of the outstanding per month making it a total of 6.85% of RM25k: RM1,712 per month. This wont just stop here. By being a revolver obviously you would utilise back your limit once you paid your monthly payment. At one point, I was relying on credit card for my fuel consumption and that was just sad.

You do the math. If you keep paying that much of money with no intention of puting a stop in your utilisation, you'll end up with that kind of payment for the rest of your life. Every month when I pay that amount for something that Ive purchased earlier pissed me off and I have no one else to blame, just myself.

So, I thought it is time for some serious ratification. I was blessed with a handsome amount of bonus on one particular year (i worked in .gov related organization so that kind of bonus was considered good eventhough its peanut for some MNC), so I paid off one by one my card each year. Also, I resulted to converting my cards towards personal loan with fixed amount of payment every month with no room for any more utilisation. I cut my cards into 2 and I feel proud.

It took me 2 years to basically clear off my debt. Of course, I suffered along the journey but now I feel lighter in the credit burden department. I felt like writing this because I feel like sharing the consequences of spending outside your capacity and reliance on the plastic will not do you any good.

I now pay my expenses using my debit card. Thank God for Maybank Visa Debit. The expenses is now directly debited to my account so there is no more excuses of swipe first worry later.

I think you should do the same


Anonymous said...

Good story and i have been to that phase too.it is sickening to see my sister is now going to that phase.Tired of advising i ended up leave it to her to experience it herself.i came to realise experience is the best teacher.So,true enough,now she's been payingthe debt and can't enjoy her pay much :)

mclarenna said...

Yah tell me about it. I have a friend who is still in denial and accumulated debt can easily get him one Perodua MyVi. To me that is so scary. I agree with you, the best teacher is for them to experience it themselves. How much I feel like saying I told you so, it wont help either. For now, the best is for you to discourage her on her spending by saying she bought an ugly tops or handbag. Ouh ya, keep her off handbag store. thats the silent killer. Thank you for reading my story, appreciate it. I feel like telling once i read about youngster debt nowadays. the statistic are beyond words


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