Key Takeaways
- AKPK credit card debt may seem daunting, but individuals can prevent spiralling into uncontrolled debt by identifying common credit card traps.
- Some of the biggest challenges of managing credit card debt are the habit of overspending, accumulating interest, misleading credit card terms and difficulty tracking multiple credit cards.
- Uncontrolled credit card debt may lead to a lower credit score, high credit utilisation, rejected loan applications and more.
- Seeking professional help, such as AKPK, can help individuals successfully manage and overcome their credit card debts.
- More importantly, borrowers should stop accumulating more debts and adjust their spending habits and lifestyle to gain financial stability in the long run.
With the expert assistance provided by Agensi Kaunseling dan Pengurusan Kredit, or AKPK, credit card debt becomes a more approachable challenge.
This article delves into the invaluable support and structured programmes that AKPK offers to help individuals overcome their credit card debt.
Whether you’re grappling with high balances, struggling to meet monthly payments, or seeking to improve financial literacy, AKPK’s services help you achieve a debt-free life.
What are the Challenges of Managing Credit Card Debt in Malaysia
1. Tendency to Overspend
Credit cards can lead to higher spending compared to using cash because using a credit card doesn’t have the immediate psychological impact or ‘pain’ of parting with cash.
To counteract this, individuals should set personal spending limits. This means creating a budget and being mindful of their spending habits.
2. Interest Complicates Balance Repayment
You can avoid interest charges if you pay off your credit card balance in full each month. This is the ideal way to use a credit card.
However, making only the minimum payment leads to accrued interest on the remaining balance. This interest increases the total amount owed over time, making it harder to clear the debt.
3. Risk of Accumulating Debt
Continuous borrowing on credit cards can lead to a significant accumulation of debt.
This can result in a financial downward spiral, impacting not only one’s financial stability but also overall well-being, health, and lifestyle.
Early recognition of impending debt and adjusting spending to live within one’s means is crucial to avoid this situation.
4. Misleading Minimum Payments
Credit card companies often require only minimum payments to avoid late fees. While this seems helpful, it prolongs the debt and leads to more interest being paid over time.
Paying more than the minimum amount whenever possible can help reduce the total interest paid and expedite debt clearance.
5. Complexity of Credit Card Terms
Credit cards come with various terms, interest rates, and seasonal offers, which can be confusing.
It’s important to thoroughly read and understand these terms and conditions and seek clarification to avoid unintended debt.
6. Difficulty in Tracking Multiple Credit Cards
Managing finances becomes more challenging when you’re using multiple credit cards, along with other payment methods like debit cards and e-wallets.
Each credit card has its own unique due date, and missing these dates can result in accrued interest charges, adversely affecting your CTOS or CCRIS score.
This may be reflected in your record with a notation such as ‘1’, indicating a missed payment.
However, using tools like spending journals or personal finance software can help track expenses and manage debts more effectively.
These tools aid in timely payments and avoiding unnecessary interest fees by providing reminders for each credit card’s due date.
Read More: Credit Card Debt Malaysia: How to Pay Off Your Credit Card Debt
What is the Impact of Uncontrolled Credit Card Debt
Uncontrolled credit card debt can have several serious impacts on an individual’s financial health and overall well-being.
1. Negative Impact on Credit Score
Late payments on credit cards are one of the major factors that can negatively affect your credit score. Even a single late payment can lead to a significant drop in the score.
These negative marks on your credit report can remain for up to seven years. They can also:
- Affect an individual’s ability to obtain credit and favourable interest rates.
- Impact non-credit matters like renting apartments or employment opportunities.
2. High Credit Utilisation
Credit utilisation refers to the percentage of your available credit that you are using. High credit utilisation, especially consistently reaching or exceeding your credit limits, negatively impacts credit scores.
It signals to creditors that you’re reliant on credit and may be struggling to manage your finances.
A general rule of thumb for maintaining a healthy credit score is to keep total credit utilisation below 30%. This demonstrates responsible credit management.
3. Rejected Loan Applications
When applying for loans, banks review your credit history and score to assess your creditworthiness. A history of uncontrolled credit card debt reflects poorly on this assessment.
A high Debt Service Ratio (DSR), which indicates a large portion of income going towards debt repayment, makes banks hesitant.
They may view you as over-leveraged and risky, leading to rejected loan applications.
4. Risk of Bankruptcy
In severe cases, if you’re unable to pay your credit card bills, banks may initiate legal proceedings.
Under Malaysian law, a person may be declared bankrupt if they have an outstanding debt exceeding RM100,000 and a default period of at least 6 months.
Bankruptcy has long-term consequences, including restrictions on travel, business operations, and holding certain public offices.
Read More: Personal Loan for Credit Card Debt in Malaysia
How to Manage AKPK Credit Card Debt in Malaysia
Managing AKPK credit card debt in Malaysia involves several key strategies, each aimed at regaining financial stability and overcoming debt challenges.
1. Seek Professional Help
AKPK offers free financial advisory services and a debt management programme (DMP) to help individuals in Malaysia better understand and manage their finances.
The expertise and guidance provided by AKPK can be invaluable in helping borrowers navigate their financial situation and decide on the best course of action.
2. Enrol into AKPK’s Debt Management Programme (DMP)
The DMP is designed for individuals struggling with multiple credit card debts.
Once enrolled, AKPK will assess your financial situation and develop a personalised repayment plan for your credit card debt.
The programme consolidates multiple debts with varying interest rates and deadlines into a single monthly payment, making managing it easier.
However, there are some important considerations:
- While in the programme, you’re prohibited from applying for new credit facilities, including credit cards, personal loans, home loans, and car loans.
- Enrolling in AKPK can affect your ability to register a new company account, as banks might be cautious about clients enrolled in a debt management programme.
- Your employment status might be affected, as some companies have policies regarding employees’ financial situations, including their participation in the AKPK.
- Participation in the DMP can also influence your eligibility for certain corporate roles or opportunities, like being promoted or receiving new company shares.
3. Adjust Lifestyle and Financial Habits
Individuals need to adjust their lifestyle and spending habits to successfully manage and eventually eliminate debt.
This might not have to be a permanent change, but it is crucial for improving financial situations.
Some strategies include cutting unnecessary expenses, creating and adhering to a monthly budget, tracking daily expenses, and sticking to a shopping list.
4. Stop Accumulating More Debts
It’s essential to stop incurring additional debt and switching to cash can help in this regard.
The tactile and visual aspect of using physical money often helps reduce overall spending, as it makes the act of parting with money more tangible.
Under AKPK’s DMP, borrowers have restricted access to lines of credit, which naturally helps curtail further debt accumulation.
Read More: Should You Use Your EPF Savings to Apply for a Personal Loan
How Bluebricks Can Help You with AKPK Credit Card Debt
With disciplined financial management and support from AKPK, individuals can effectively tackle their credit card debt, paving the way for a more secure financial future.
At Bluebricks, we cater to two distinct client profiles:
- Those not yet enrolled in AKPK
We offer tailored solutions, such as consolidating all credit card debts through a personal loan. Our assistance extends to individuals with Debt Service Ratios (DSRs) exceeding 70% or facing late payment issues, provided their monthly income is at least 5,000 MYR and there are EPF deductions.
- Those already enrolled in AKPK
We facilitate their exit from the programme and guide them towards obtaining a new loan.
With a refreshed financial profile, they can reapply for bank loans (including personal and SME loans), make significant purchases like cars or homes, and apply for new credit cards.
As a reputable bank loan and debt consolidation agency, our financial services include:
- Personal loan services
- SME loan services
- Mortgage loan services (for buying a new home, refinancing and cashback purposes)
- Collateral loan services
Trusted Loan Consultancy Services
Depending on your financial status and funding needs, we can help recommend suitable financial products available in the market.
In doing so, we take into account several criteria, such as:
- The specific loan amount you require.
- The urgency with which the loan amount is needed.
- Whether you or your parents own a property that has been held for over ten years.
- Your income level.
- Your CTOS score (such as your credit score and credit history).
AKPK Credit Card Debt – FAQs
When individuals engage in the helpful services of AKPK, credit card debt can be handled more effectively to avoid lasting consequences to their financial and personal lives.
Let us go into some of the frequently asked questions about how AKPK can assist with credit card debt as well as the impact after AKPK.
Malaysians facing difficulty in managing their credit card payments can benefit from AKPK’s services.
This includes individuals who have accumulated high levels of debt, are struggling to meet minimum monthly payments, or are simply seeking advice on how to manage their credit card usage better.
However, there are several eligibility criteria to enrol in AKPK’s debt management programme.
No, AKPK offers its services, including the Debt Management Programme (DMP) for credit card debt, free of charge.
AKPK aims to help individuals gain control over their finances without adding additional financial burden.
The time it takes to clear credit card debt through AKPK varies depending on the amount of debt and the repayment plan agreed upon.
Generally, it can take anywhere from a few years to 10 years through a realistic repayment plan based on the individual’s financial situation.
Successfully completing the AKPK’s DMP can positively impact your credit score over time.
Consistent repayment under the programme demonstrates financial responsibility and creditworthiness, which are key factors in credit scoring.
