Consolidating Credit Card Debt In Malaysia: 2 Simple Methods

How to consolidate credit card debts

Credit card has become a big part of the Malaysian lifestyle. Unfortunately, whatever convenience it brings has also led to towering debts (and in certain cases, bankruptcies) for cardholders far and wide.

If you too have credit card debts that are about to spiral out of control, it is probably time to think about consolidating your debts. Here are two viable ways for you to do so in Malaysia.

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1) Undertaking a credit card balance transfer

Credit Card Balance Transfer is the transfer of balance (i.e. the amount of money you owe) on your existing credit card account to a new credit card account with a new bank (or credit card company).

The benefits of balance transfer has been extensively discussed in our article Credit Card Balance Transfer: What Is It and How It Benefits You; but to put it in the simplest terms, it helps you to lower the interest you’re paying and to keep things simple when it comes to dealing with your credit card bills in the long run.

Why it would work

  • If you have serious credit card debts, you’re probably being charged at the maximum interest rate (usually 17.5% p.a.) based on the tiered interest rate structure adopted by Malaysian banks.
  • Say you have a debt of RM10,000 on your credit cards, that amount would increase by about RM146 in interest alone, in just one month! This massive interest is one of the key reasons people are unable to keep up with their credit card debts.
  • By taking advantage of credit card balance transfer (some of which offers zero interest rate for the first year or so), you can temporarily cease paying interests that are preventing you from paying off your debts.
  • Even though the banks may charge you a once-off 3% balance transfer fee, you’ll still be paying less over the course of a year due to the sheer difference in interest rates.

To help put things into perspective:

Average Maximum Interest Rate for Credit Cards: 17.5%
The Lowest Balance Transfer Interest Rate: 0% (for limited time)
Your Possible Savings on Interest: – 17.5% (for limited time)

Interested? Check out how much you can save with balance transfer right now.

2) Taking up a personal loan

Though the idea of borrowing money from the bank to pay off your credit card debts may sound far-fetched, it is actually a highly workable debt consolidation model if you do it strategically by taking advantage of the difference in interest rates between a credit card and a personal loan.

Why It Would Work

  • Once again, if you have serious credit card debts, you’re probably being charged at the maximum interest rate (usually 17.5% p.a.) based on the tiered interest rate structure adopted by Malaysian banks.
  • At current, there are plenty of personal loans with interest rates that are significantly lower than the maximum interest rate of a credit card. As at 2013, some interest rates for personal loans are as low as 9.88% p.a..
  • Say you take up a personal loan to pay off debts totalling to RM10,000 on your credit cards, you’ll be paying much less due to the sheer difference in interest rates between the two, even after deducting the fees and charges associated with a personal loan!

To help put things into perspective:

Average Maximum Interest Rate for Credit Cards : 17.5%
The Lowest Personal Loan Interest Rate: 9.88%
Your Possible Savings on Interest: – 7.62%

Interested? To find a personal loan with the lowest interest rate, check out this personal loan comparison table right now.

Love this article? You may also wish to read about the 5 simple steps when getting a personal loan.

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