How I Merged 5 Credit Card Debts Into One—And Saved PHP50K in Interest

Still drowning in credit card debt? I also was too. Till I figured out a means of escaping and could save PHP50K in interest.

Meet Manila-based marketing specialist Patricia, thirty-two years old. She used credit cards for daily spending, sporadic indulgences, and unanticipated crises, much like many Filipinos did. Her spending patterns, however, over time resulted in a financial mess that apparently seemed insurmountable. This is the account of how I paid off ₱250K in credit card debt in 2 years—and how you might also.

The Problem:

Patricia's journey into debt began innocuously. A dinner out here, a shopping spree there, and soon, she was juggling five credit card accounts with a cumulative debt of PHP250K. The reasons were varied:

• Lifestyle Inflation: Her expenditures rose with her income. She changed her way of life without thinking through the long run financial consequences.
• Medical Emergencies: Unexpected medical problems resulted in large costs she paid using credit cards.
• Unchecked Spending: Impulsive buys become the standard without a rigorous monthly budget.

Managing five different due dates and varying interest rates became overwhelming. Each month, her credit card payments barely scratched the principal amount; the bulk went towards interest payments. The weight of the debt was not just financial but emotional, leading to stress, anxiety, and sleepless nights.

Research & Stats:

Patricia's situation isn't unique. In the Philippines, the average credit card interest rate is capped at 3% per month, translating to 36% annually. This high rate can quickly trap individuals in a cycle of debt, where minimum payments barely cover the accruing interest. The mental toll is significant, with many experiencing heightened stress and anxiety due to mounting financial obligations.

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The Moment of Clarity:

One month, Patricia missed a major payment on her credit card bills. This oversight resulted in hefty late fees and a further spike in her interest rate. The realization hit hard: almost reaching her credit limit and just paying the minimum amount was a never-ending cycle. She needed a concrete strategy to regain control.

Her First Steps:

Determined to change her financial trajectory, Patricia took proactive measures:

1. Educating Herself: She delved into debt reduction strategies, reading articles, attending workshops, and seeking advice from financial experts and credit counseling.
2. Budgeting: Patricia meticulously tracked her expenses, payment history and personal finance, distinguishing between needs and wants. This exercise highlighted areas where she could cut back.
3. Exploring Debt Consolidation: She researched ways to merge her multiple debts into a single payment plan.

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‍Step 1: Debt Assessment

Patricia began by listing all her existing credit card debt, noting the outstanding balance, interest rates, and due dates. This comprehensive overview revealed the stark reality: her high-interest debts were the primary culprits in her financial strain. Additionally, the Credit Card Association of the Philippines (CCAP), also provides information about responsible credit card usage which you can utilize effectively to avoid insurmountable credit card debt.

Step 2: Consolidation with a Balance Transfer Card

Through her research, Patricia discovered the concept of balance transfer credit cards offered by a credit card company. These cards allow users to transfer existing high-interest debts to a new card with a lower or even 0% interest rate for a promotional period for debt settlement.

She utilized Finmerkado, a financial comparison platform, to find a balance transfer credit card offering 0% interest for 12 months. By moving her outstanding credit card debt to this card, she consolidated her payments into one manageable monthly payment, significantly reducing her interest burden. Alternatively, you can also use personal loans for debt consolidation.

Step 3: Choosing a Repayment Method

Patricia considered two popular debt repayment strategies:

• Debt Snowball Method: Focus on paying off the smallest debt first to gain momentum.
• Debt Avalanche Method: Prioritize debts with the highest interest rate to maximize savings.

Given her substantial interest payments, Patricia opted for the debt avalanche method. This approach not only accelerated her debt repayments but also saved her approximately PHP50K in interest over time.

Step 4: Cutting Expenses & Boosting Income

To expedite her journey to financial freedom:

• Reducing Non-Essentials: Patricia canceled unnecessary subscriptions, limited dining out, and curbed impulse purchases and mainly focusing on spending on essentials like food, utility bills and mortgage payments.
• Maximizing Rewards: She used cashback credit cards for essential expenses, ensuring she paid off the balance in full each month to avoid interest.
• Supplementing Income: Patricia took on freelance projects, directing all additional earnings towards her debt repayments.

Step 5: Staying on Track

Setting tangible milestones was crucial. Celebrating achievements like paying off the first PHP50K and then PHP100K kept her motivated. She also used Finmerkado’s financial tools to monitor her progress, ensuring she remained aligned with her goals.

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Concrete Wins:

• Debt Elimination: Patricia paid off her PHP250K debt in just two years, a significant improvement from the decade or more it would have taken with minimum payments.
• Interest Savings: By leveraging the balance transfer card from a credit card provider and the debt avalanche method, she saved approximately PHP50K in interest.
• Credit Score Improvement: Her credit score soared from 570 to 770, opening doors to better financial opportunities.

Emotional Wins:

• Peace of Mind: The constant worry about debt vanished, leading to restful nights.
• Renewed Confidence: With her finances in order, Patricia felt empowered to start investing and planning for her future.
• Financial Control: She transitioned from being overwhelmed by her finances to confidently managing them.

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Patricia's journey offers valuable insights:

1. Assess Your Debt: List all outstanding debt with their interest rates and due dates to understand your financial landscape.
2. Consider Balance Transfers: Explore balance transfer credit cards to reduce interest rates and consolidate payments.
3. Choose a Repayment Strategy: Whether it's the snowball method or debt avalanche method, select a plan that aligns with your financial situation and stick to it.
4. Reduce Expenses & Increase Income: Identify non-essential expenses to cut and seek additional income streams to accelerate debt repayment.
5. Monitor Progress: Use financial tools to track your journey and celebrate milestones to stay motivated.

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Patricia's experience is evidence of the need of strategic planning and financial discipline. She not only cleared her debt but also laid the groundwork for long-term financial success by evaluating her bills, using a balance transfer credit card, and pledging to a disciplined repayment schedule. Her path emphasizes how anyone can overcome debt and take back financial freedom with the correct tools, education, and attitude. Review your debt, investigate consolidation choices, and create a strategy to reach financial independence if you find yourself battling with credit card debt now.

Are you ready to slash your interest payments and break free from debt? Explore Finmerkado’s top balance transfer credit cards today and take the first step towards financial freedom.