Merry Christmas and happy new year!!!
While we wish and cheer each other with champaign submerging in laughter and joys, behind these greetings and celebrations, the underlying resource consumed to fuel the felicity is this object called money. Well, not to worry for now, human is so smart that we created a piece of plastic named credit card, it will take care of all these bills and all we need to do is just put our signature on that small piece of printout. That's it. Simple!
Really? I know, I don't mean to let you down in the midst of celebrations. But let's get real, credit card is not a magic wand, it does not make your bills disappeared, it only prolongs the payment term and it definitely will come back and catches you off guard if you are not prepared enough. Therefore, if you are not equipped with a deep pocket instead of a weak heart, do yourself a favor, don't over spend during festival seasons.
Okay, the damage is done, it serves no purpose crying over spilled milk. I agreed. But we have to get ourselves prepared for the next coming credit card statement. If you have a budget, you have set aside some fund and you did not brow it, great! Good night and have a sweet dream. On the other hand, if you can't even spell the word budget, then we have some work to do.
As you know, credit card interest rate is higher than other normal loans. Credit card rate of interest quoted is the monthly interest rate, unlike in property mortgage loans or hire purchase, the rate quoted is on per annum basis. Hence, if your credit card issuer tells you 1.5% will be charged on your unpaid balance, it means the 1.5% is charged on a monthly basis. In other words, the annual rate is 18%. Compare to your mortgage term loan which may be 5 or 6% per annum. Therefore, if we know our financial position and plan early, we can have a separate arrangement in order to mitigate interest payment before we catch our breath on paying the principal.
With that in mind, we have to take inventory of our cash flow position before receiving the next credit card statement. Calculate how much we can afford to pay direct to the credit card due, as well as how much we can set aside every month to pay for the remaining due or its equivalent thereafter.
Once the remaining credit card due is determined, we have to talk to the banks. Look for short term personal loan with lower interest rate. Depending on your personal credit rating, you may be able to get a good interest rate personal loan without any collateral required. Otherwise, you may need to produce collateral if you do have any, else, persuade someone to be your personal guarantor. Of course that is very much depending on your personal credibility and the relationship between the guarantor and you.
Not so fast, that is not all yet. If on one hand, we convert our credit card outstanding to short term loan to mitigate interest payment, but on the other hand keep signing our autograph as if the credit card printout is for our fans, the problem is not going away.
As a matter of fact, the first thing we need to do is to limit our spending on credit card. Keep it for those necessities and nothing else until the short term loan is fully settled.
That said, the most important factor to succeed in settling your credit card due is highly depending on your personal discipline and perseverance. You may have the best plan in the universe, but lack of the required determination to make it happens, it still come back to square one.