Avoid Credit Card Debt at All Cost

The pandemic has brought the world into financial distress. Several are experiencing mounting debts, which have been steadily rising since the quarantine started last year. People have lost their jobs and cannot settle their obligations due to unemployment and the unavailability of funds caused by the lockdown. Outstanding debts before the pandemic have ballooned due to interests and charges from their lenders. 

Credit card debt

Credit card debts are one of the debts that many people are having problems with right now. This type of debt typically charges exorbitant fees compared to secured loans due to the nature of the obligations being risky. I used to believe that credit cards are great financial tools as long as you promptly pay the entire outstanding balance before the due date. Credit cards offer deferred payments, rebates, rewards, low-interest unsecured cash loans, and installment payments.

I used to advocate for responsible usage of credit cards to take advantage of its benefits. After my terrible experience during the lockdown, it changed my views on credit cards. I now avoid credit cards like the plague.

One valuable lesson I learned during the lockdown is to avoid debt at all costs. No matter how hard you try to plan your finances, debt has a tremendous effect on your finances when life throws you a curveball. Having an emergency fund does not guarantee you'll be safe from your outstanding debt when unforeseen events happen to you. The pandemic last year, which nobody expected to drag this long, is a perfect example of such an event.

Before the pandemic happened, I always paid the total amount of my credit card balance. I had a few installments scheduled on my cards which were constantly updated before the lockdown happened. I reside in Cebu City, one of the provinces that experienced extended months of lockdown from March 2020 to September 2020. During these months, businesses halted, and almost everyone in the city, except for essential workers, didn't have any income source. Unfortunately for me, my work was not considered essential, and I, too, was affected by the lockdown.

At the beginning of the lockdown, the government enacted the Bayanihan act to help the people get through the dire situation the country was in. This was a tremendous help since most of the country didn't have any income source, and there were even some who lost their livelihood. Banks during this period temporarily suspended their efforts on collecting outstanding debts from their customers.

The Bayanihan Act was enacted based on the capital Metro Manila's situation, which got lifted to GCQ earlier than Cebu City. When metro manila was raised to GCQ, that was when the credit card companies started demanding payment. Despite the current situation Cebu City was in, the credit card companies continued to press payment to pay my outstanding balance. Each time I received a call from them, my reply was to remind them that Cebu City was still under lockdown and I didn't have any income during that time. Even though I keep reminding them of my situation, they never took it into consideration. At one point, they even pointed out that I run the risk of cancellation of my account and possible legal action if I don't settle my balance immediately. This harassment went on for the remainder of the lockdown.

A week after the lockdown was lifted in Cebu City, I received a letter from the credit card company that my account has been canceled. I don't mind them canceling my account since I already decided to cancel all my credit cards after the terrible experience I had with them. What bothered me was the accrued fees they charged me from my installments that became due after the cancelation.

Even though the lockdown was lifted in September 2020, things didn't immediately return to normal for most businesses. Many individuals were suffering financially, emotionally and a lot have lost their loved ones to this pandemic. Most companies were still trying to recover, and some even opted to permanently close their doors. Operations in our office only returned to normal a couple of months after the lockdown.

As of writing, I have completely stopped using my cards, and I have shifted to paying cash on all of my purchases. I am struggling to settle all of my outstanding balance, but I am optimistic that I can get through this in the next couple of months. One of my biggest mistakes was to use my credit card to purchase items on installment. The benefit I enjoyed from my credit cards turned into a nightmare when the whole world was plunged into a pandemic. My scheduled payments for these installments were disrupted during the lockdown. My installments' cancelation only made matters worse since they charged me with interest on the unbilled installment, which wouldn't have been due for the next couple of months.

Paying this unscheduled debt will be a struggle for the next couple of months, but I will find ways to eliminate these debts as soon as possible. I will be implementing strategies I have learned before to get rid of all my outstanding balance. 

I will be sharing these strategies in the following posts to help those in a similar situation. I know debt can be an inconvenience, but everything can be solved if you sacrifice and put a lot of effort into it. Lastly, let us always remember to be thankful for the things we have.

Read Three Debt Payment Strategies to Help You Get Out of Debt.

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