7 Best Tips To Successfully Settle Your Credit Card Debt In Singapore

Credit card debt is among the fastest growing type of debt in Singapore. The temptation is always there and the cashless payment methods make it so much harder to avoid.

Credit card transactions makes it easy to forget that, with every swipe you’re taking, you’re adding another brick to your financial ruin. Before you know it, you could be swimming in debt, with no way to pay even for your living expenses.

That’s why you have to take charge now.

Read the article below to find out seven strategic solutions to help you settle with your snowballing debt.

Why Singaporeans Fall Into The Credit Card Debt Trap

Don’t skip this section. 

It’s essential to get to the root of your financial mistakes so that you can avoid them in the future.

The Allure Of Cashbacks, Rewards & Free Gifts

Admit it, Singaporeans love free stuff. 

There’s nothing like discounts and free stuff to hook you. Marketing experts around the world have been using this strategy successfully for years to attract more customers.

Sometimes, it’s the staycation and holidays you take that adds to your debt. And there’s nothing wrong with analysing your options, such as cashback or rewards, before selecting the best credit card for your needs. The point is not to let things spiral out of your control.

What to do: Never get another credit card you don’t need because of these freebies because interest accumulates and you get right to this starting point again. Once you realise that you’re overspending, cancel the credit card.

Holiday Expenses

On average, Singaporeans spend about $460 for Christmas gifts, although most of us are planning to cut back on these expenses this year because of the pandemic.

But your wallet may be still bleeding for Black Friday and Cyber Monday sales.

What to do: 

1. Make a list of your necessary expenses and try to find the best discount during these holidays. Never shop without this list.

2. Offer your loved ones homemade gifts and prioritise experiences over material things.

Rolled Over Balances

If you roll over your debt month after month, you’ll max out your credit cards. Avoiding responsibility for your expenses doesn’t make the problem go away.

What to do: Pay in full by the due date and limit your expenses to the strictly necessary ones until you do.

High Interest Rates 

There are credit cards galore in Singapore, and none of them is cheap even if they all come with attractive interest rates.

Each bank has at least three different types of credit cards, with each offering its own benefits. How do you choose?

Here’s the truth:

Credit card rates in Singapore usually vary between 25% and 28% per year. It’s extremely high. 

So, with each extra expense, you’re adding more interest to your balance, which snowballs your debt.

Let’s say you’re earning $20,000/year and have a $20,000 debt. Even if you wouldn’t spend anything for a whole year to repay your credit card loans, you’d still have at least another $5,000 to pay.

What to do: Research other loan options with lower interest rates, such as a personal loan. The term “loan” might sound intimidating, but it is not. Licensed moneylenders like Lending Bee offer personal loans at acceptable rates, helping you through financial issues.

Late Payments

Late payments are another cause of accumulating credit card balance because they make your debt snowball even more and they affect your credit score.

And we all know that people with low credit scores can’t get affordable loans as readily.

What to do: Try to become a conscious spender by learning sound money management techniques.

What Are The Ways To Settle A Credit Card Debt?

Now that you know how to avoid more credit card debt in the future let’s see how you can fix your current problems.

1. Close Unnecessary Accounts

Unrestricted access to credit cards is one of the reasons why you’re fighting increasing credit card debt.

We discussed the allure of cashback and gifts above. According to statistics, the average number of credit cards per capita in Singapore is around 1.6. However, 10% of Singaporeans have more than six open credit cards.

There’s some good news:

Approximately 90% of Singaporeans pay their outstanding balances on time. 

The bad news is that the rest do not. And, if you’re reading this article, chances are you’re in the second category.

So here’s your first step: close any accounts you’re not using.

Remember that your interest accumulates over time and you’re also forking out a generous sum for other charges.

Besides, multiple available credit facilities damage your credit score. That means your credibility among the “establishment” decreases, so it’s more difficult to borrow the money you need when you’re in an emergency.

Here’s how to do that:

• Prioritise one or two credit cards which are the most useful and have the lowest interest rates.
• Don’t apply for a new one readily.
• Limit your credit card facilities to 2-3 once you’ve settled all your debt.

2. Always Pay In Full

The best way to deal with your debt is by paying your outstanding balance in full now so that you don’t accrue any more debt.

Remember that credit cards don’t offer you free money. Banks are pretty sneaky with their advertising, as many brag about their low minimum required payments that help you avoid late payment fees.

But minimum payouts don’t magically wipe away your interest; paying in full does.

3. Make Constant Monthly Payments

Build your monthly budget to find out your payment capacity:

• Make a list of your necessary monthly expenses, such as utility bills, food, and transport.
• Subtract these payments from your income, and you’ll learn how much you can deposit in your credit card accounts.

If you can’t pay in full, minimum repayments are the lesser evil.

If you don’t have enough money in your budget to cover your credit card bills now, pay the minimum amount at least.

Usually, this sum adds to about 3% of your loan, a sum that is affordable to most Singaporeans. But remember that it can take a lot of time to pay your overdue balance this way, so this is a short-term solution.

Here’s why:

In the third quarter of 2020, the average balance per credit card was around $2,600 – $700 more than during the past quarter.

But if you owe this amount and pay just 3% of it at an interest of 25% per year, you’ll need about 5 years (58 months) to repay the whole debt. At the end of these five years, your interest will amount to $1,885.

And that’s assuming you won’t accrue any more outstanding bills.

4. Start With The Target Debt

If you have multiple credit card facilities and a low payment capacity, you need to focus on the debt with the highest interest.

Of course, you should also transfer at least the minimum amount on the other credit cards. But, if you have money left after making all the minimum payments, don’t split this sum evenly between your accounts.

The point of prioritising the credit facility with the highest interest is to save yourself the money that you’d otherwise pay for the enormous rates.

That way, you’re decreasing your principal amount considerably.

5. Lower Your Interest Rates

We already discussed that outstanding credit balance and multiple credit cards make your interest rates snowball.

So it’s only common sense that you should reduce your interest rates.

The solution is getting a balance transfer from another bank to cover your credit card dues. Or, you can apply for a credit card consolidation loan to help repay your credit card bills first. The total interest incurred from the loan will be lesser than that of the cards.

Here’s the main benefit:

You’re not paying any interest rate for at least six months, although some banks extend this zero-interest period to a year.

Before choosing this option, remember you need a sound plan to make repayments within the zero-interest timeframe.

6. Look Into Debt Consolidation Plans

Debt consolidation plans are among the top strategies for settling credit card debt because it also eliminates excess interest rates.

Here’s how:

You get a debt consolidation loan from a bank or a licensed money lender to amass all your credit card debt into one.

The advantage is paying just one affordable monthly instalment, with a significantly lower interest rate. Therefore, most people who choose this alternative can pay off their dues quickly within the agreed period.

Another advantage is the certainty of your well-established repayment scheme.

Credit card debt can quickly snowball, but not a debt consolidation loan.

Here’s what you should consider before, though:

• If you have a lot of debt and a low credit score, some banks might not grant you a loan. Research banks’ conditions to see if you’re eligible. If not, apply directly with a moneylender because multiple loan applications within a short timeframe, mostly rejected ones, lower your credit score.
• You shouldn’t accrue more credit card debt. Stick to your budget to ensure your monthly expenses are lower than your income. And remember to always pay your debt in full when you’re using your credit facilities.

7. Credit Counselling

If you can’t implement these strategies by yourself, you should try credit counselling.

Credit Counselling Singapore is your best bet to get out of your financial distress. This NGO has years of experience helping thousands of people who accumulated bad debt, plus Singapore’s government and Banks Association also recognise it.

Here’s what you’re getting:

Tons of free literature

A quick visit to their website will show you that CCS holds frequent talks and webinars on how to handle your loans and solve your financial problems. You can also browse through their array of videos and links that talk you through your best options to solve your problems.

Affordable services

Considering that most resources are free, and a one-on-one meeting with an expert counsellor costs just $30 for a few information-packed hours, CCS brings a lot of value for money. Besides, most people need only one session to come up with a plan for solving their financial difficulties.

Debt Management Programme

CCS offers a wide array of services, but the Debt Management Programme is arguably the best of all. Firstly, CCS is the only social service agency in Singapore to provide you with this efficient debt repayment scheme, and that’s why most people enrol.

Here’s why this programme is worth it:

The CCS counsellor will assess your specific problems, budget, and payment capacity to devise a personalised repayment scheme. This scheme will be affordable and easy to stick to because it’s tailored to your exact needs and expense habits.

Then, CCS will help you negotiate this scheme with your lenders.

This point is where you’ll be glad that CCS holds high levels of trust with both the government and the banks. That’s because CCS has a lot of standing among all creditors so that they’ll most likely approve your new repayment scheme.

In Conclusion

If you follow the strategies above, you’ll become debt-free quickly.

Remember to avoid any more unnecessary expenses and to make timely payments always. As you get more control over your finances, you’ll have more peace of mind and your credit score will increase.

In the meantime, if you need a quick, affordable loan to help you start over, you can get it here. Lending Bee offers fast and affordable loans that can assist you in any situation. Read our positive reviews here.

About Lending Bee

In a volatile, uncertain, complex and ambiguous world, you can count on one thing – your partner in credit, Lending Bee. Just like an industrious bee, we are committed to helping each and every customer access credit – quickly, easily and seamlessly.