A: You are not alone, Maya. Other people are also scratching and shaking their heads at how they have spent so much for gifts and parties during the last holiday season. For some of them, they only learned how much debt they have accumulated when the bills arrived in January.
Overwhelming as it may seem, it is not a hopeless situation. The fact that you are aware of the need to do something about it is a good start. Others may just shrug it off and default on their payments, not knowing that the consequences will be much worse.
Below we share specific tips on how you can handle a debt like this and make sure any future debt will be manageable.
1. Review all your bills. Did you charge your expenses to your credit card? Make sure all entries are valid and that you did make those purchases. In case there is a dubious entry, find out if you made that purchase; if not, call the credit card company hotline right away. Most hotlines are open 24 hours a day, 7 days a week.
2. Draft a payment plan. If paying off the entire bill in one go may be difficult, as you said this is more than your monthly pay, break up the total bill in smaller "monthly bills." See how much you can afford to pay each month taking into account your day-to-day expenses. Credit cards usually indicate a minimum amount due that you need to settle to keep your account current. Make sure you pay that and on time, to maintain a good credit history. If you can afford to pay more, do so. This way, you will be able to settle your balance in a shorter period.
3. How about an installment plan? Some credit card companies allow clients to convert their balance into an installment plan. Cardholders prefer this so they have a better idea of how much they need to pay every time, and also because they know when the debt will be fully paid. Citi cardholders can avail this simply by calling the 24-hour customer hotline. Check with your credit card company if this option appeals to you.
4. Own more than one credit card? If you have more than one credit card, and carry substantial balances in both, consider consolidating all in one account for easier tracking and payment. Balance conversion offers by credit card companies give attractive low rates so make sure you ask around. You may also consider switching to a card that offers cash rebates, such as the Citi Cashback Card.
5. Take out a loan, if need be. If, after making a payment plan, you realize it simply is not doable or it will take you two years or more to pay off the entire debt with interest, you may want to consider taking out a loan from your employer or the GSIS or SSS, or a bank. The advantage of this is that you free up the credit line of your card for emergencies, you will enjoy lower interest rates, and you will know the length of time it will take you to pay off your debt. Citibank Savings offers personal loans that can be released in as soon as two days.
6. If you earn any extra income or receive any cash windfall (for instance, bonus, gift or a cash raffle prize), use it to pay off your debt. This will greatly help you bring down your balance, and pay your obligation more quickly.
7. Have the whole family in on this goal of helping you get out of debt. In thinking of where and how to spend time together, go for budget-friendly activities and shop wisely.
And to make sure you don't find yourself in the same situation next year, this early, make a list of people you intend to give gifts to in December for the holiday season. Set a clear budget for each gift and make a note to yourself not to go beyond it. Throughout the year, you will find items that will suit the recipient and fit your budget. Make little purchases throughout the year to spread out your spending so you won't be tempted to charge everything in December and receive another big credit card bill in January. Good luck!
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