My friend, Rutch, sent me a text one time. She wanted help on how to get out of the credit-card trap. She was a BPI Credit card user just like me.
She used her credit card and has been paying the minimum payments for many months. In the meantime, finance charges are mounting and she is spending many times more than if she saved up and paid for her purchases in cash.
Her question was: How do I get out of this hell of paying minimum payments on credit card bills?
Here was my advice to her:
- First, stop using your credit card.
- Second, make use of BPI’s Special Installment Plan Balance-Transfer. In effect, this cuts your credit card balance into equal payments of 3, 6, 9 or 12 months but includes an additional interest rate. This gives you enough breathing-room to really pay for your balance instead of just paying the minimum payment.
Rutch later asked: “What should I choose, 3, 6, 9 or 12 months?”
This is a good question. If she chooses 3 months, the balance divided by 3 will be big amounts in a short period. If she chooses 12 months, the monthly payments will be smaller (balance divided into 12) but she will end up paying a bigger total payment.
- Compute from your own budget for the next many months how much you will COMMIT to pay for the credit card.
- Allot much as you can and pay-off the debt as early as you can.
- The debt-payment amount that you can reasonably COMMIT to pay for the credit card monthly payment should approximate the SIP monthly payment you choose — whether its 3 months or 12 months.
Go to your nearest BPI branch or kiosk, ask about their SIP service. You’ll need to fill-out a form and declare how much of your credit card balance you will convert into SIP fixed monthly payments, and for how many months. Ask the banker to compute the for 3/6/9/12 monthly payments so that you can choose the monthly-payment that matches your budget.
Get out of the credit card trap. Convert your credit card debt intoÂ fixed monthly payments and pay them off as early and aggressively as possible.
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