Key Takeaways
- If you can’t afford credit card payments in Malaysia, you will face some serious consequences.
- Steps to take when you can’t afford credit card payments:
- Contact your bank
- Combine all your credit card debt into a single loan
- Enroll in AKPK’s Debt Management Programme
- Make prompt payments
- Re-evaluate your budget
- Transfer a high-interest balance to a new card with low or no interest
Can’t afford credit card payments in Malaysia? With rising living costs and unexpected financial challenges, it’s easy to find yourself in a tight spot.
But don’t worry; you’re not alone, and there are many steps you can take to manage your debt and get back on track.
In this article, we’ll explore effective strategies and expert advice to help you navigate these tough times and regain control of your finances.
Let’s dive in and find the best solutions for your situation!
What Happens if You Can’t Afford Credit Card Payments in Malaysia?
1. Immediate Consequences
a. Late Payment Fees
When you can’t afford credit card payments in Malaysia, one of the first repercussions is late payment fees.
These fees can be substantial, usually starting at RM10 or 1% of the outstanding balance (whichever is higher), with a maximum cap of RM100 per statement.
This additional cost can quickly add up, compounding your financial difficulties.
b. Interest Rate Hike
Missing a payment may also trigger a penalty interest rate on your outstanding balance.
This higher interest rate increases your overall debt due to compounded interest, making it even harder to pay off your balance.
c. Negative Credit Rating Impact
Late or missed payments are reported to Malaysian credit bureaus, including the Central Credit Reference Information System (CCRIS).
A low credit score can make obtaining approval for future loans or credit cards challenging and may lead to higher interest rates even if you are approved.
2. Further Consequences (If Unresolved)
a. Collection Calls and Letters
If your overdue payments remain unresolved, your bank will begin contacting you through phone calls and letters in an attempt to collect the overdue amount.
This can be a stressful and persistent reminder of your financial obligations.
b. Card Suspension
Continued missed payments can lead to your credit card being suspended.
You will no longer be able to use your card until you settle the outstanding balance, limiting your access to credit.
c. Negative Impact on Credit Report
Persistently deferring or failing to pay your credit card debt results in a negative mark on your credit report. These reports are accessible to all banks via the CCRIS and are linked to Bank Negara Malaysia.
A poor credit history can lead to being blacklisted by banks, severely impacting your future borrowing capabilities.
This can make it difficult to secure a mortgage, buy a house, purchase a new car, or obtain a personal loan.
d. Interest & Fees Accumulation
The interest rate on overdue amounts can be quite high, significantly increasing the total amount you owe.
If you have a savings account with the same bank as your credit card, the bank may be able to auto-debit the due amount from your savings account.
It’s essential to check your bank’s specific policies regarding this. In some cases, banks may freeze your savings accounts and prevent you from transferring funds, further complicating your financial situation.
e. Risk of Bankruptcy
Lastly, banks may eventually resort to legal action if you can’t afford credit card payments.
In Malaysia, being declared bankrupt occurs when your total debts reach or exceed RM100,000.
For instance, if you have an RM30,000 credit card debt and an RM80,000 personal loan, the bank can file for bankruptcy against you.
Once declared bankrupt, a Director General Insolvency (DGI) will be appointed to liquidate your assets to settle your debts.
Additionally, your passport will be held by the DGI, barring you from leaving Malaysia.
Understanding these consequences highlights the importance of addressing credit card debt promptly to avoid further financial distress.
Read More: What is Outstanding Balance in Credit Card in Malaysia
What to Do When You Can’t Pay Your Credit Card in Malaysia?
1. Contact Your Bank
If you can’t afford credit card payments, the first step is to communicate with your bank as soon as possible. Transparency is key.
Explain your situation honestly and explore the options they might offer, such as:
- Payment Restructuring: Your bank may agree to restructure your repayment plan, allowing for lower monthly instalments spread over a longer period.
- Interest Rate Reduction: In some cases, banks might negotiate a temporary reduction in your interest rate to help ease your financial burden.
2. Debt Consolidation
Another effective strategy when you can’t afford credit card payments is debt consolidation.
This involves combining all your credit card debt into a single loan with a potentially lower interest rate.
Not only does this simplify your repayment process, but it can also save you money on interest charges.
3. Debt Management Programme (DMP)
Consider enrolling in a Debt Management Programme offered by Agensi Kaunseling dan Pengurusan Kredit (AKPK), a government agency.
AKPK can negotiate with your creditors to secure lower interest rates and develop a repayment strategy tailored to your financial situation.
4. Settle Your Payments Promptly
Even if you can’t pay the full amount, making prompt payments can still be beneficial.
Payments made after the due date will not avoid late fees, but they will reduce your principal balance, decreasing overall interest charges.
Moreover, paying more than the minimum can have a significant impact since payments are applied to the highest interest rates first.
Small payments can also help you avoid full delinquency and keep open lines of communication with your card issuer.
5. Develop a Debt Reduction Strategy
Re-evaluate your budget and use payment calculators to determine how long it will take to clear your debt with affordable payments.
You may need to make tough lifestyle adjustments or consult a credit counsellor to achieve financial recovery.
To prevent further debt, refrain from making new purchases on your credit card and use cash or a debit card instead.
6. Try Credit Card Balance Transfers
Moving a high-interest credit card balance to a new card with low or no interest can accelerate your debt repayment.
However, this typically requires a good credit rating, making it less accessible for those with poor credit.
Be aware that most issuers charge a 2 to 3% fee on the transferred amount, which can reduce your expected savings.
After transferring a balance, it’s wise to cut up the old credit card and close the account to avoid accumulating more debt.
Read More: Personal Loan for High Commitment Individuals in Malaysia
Why Was Your Bank Loan Application Rejected in Malaysia?
Applying for a bank loan in Malaysia can be challenging, and several factors might lead to rejection:
1. Credit Issues
- CTOS score below 550: Banks consider this a high-risk indicator.
- Late payments: More than two months overdue within the last six months.
- Special Attention Account (SAA): Flagged accounts.
- Trade references: Exceeding RM1,000.
- Legal issues: Including bankruptcy.
2. Income Factors
- Recent employment: Less than six months at your current job.
- Income in cash: Unverifiable income.
- No EPF contributions: Employment without EPF contributions.
- Contract or freelance work: Considered unstable income.
3. High Debt-to-Service Ratio (DSR)
- DSR over 70%: Monthly instalments exceeding 70% of net income make approval unlikely.
In situations like these, bankers cannot assist clients in securing a loan. Applying to these circumstances would not only waste time but could also worsen your financial record.
If rejected, you must wait six months before reapplying to the same bank, and each application can lower your CTOS score by 30 to 50 points.
Moreover, a CTOS score below 550 leads to immediate rejection by some banks.
How Bluebricks Can Help If You Can’t Afford Credit Card Payments in Malaysia
At Bluebricks, a bank loan and debt consolidation agency in Malaysia, we specialise in providing various loan options to help you consolidate your debt and manage your repayments more effectively:
- Personal loan services
- SME loan services
- Mortgage loan services (to purchase a new home, refinancing and cashback purposes)
- Collateral loan services
Trusted Loan Consultancy Services
Our experienced consultants are here to guide you through the loan selection process.
We take into account your unique financial situation and recommend the most suitable loan product based on various factors, including:
- 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).
Why Bluebricks
1. One of the Top 10 Leading Loan Agencies in Malaysia
Our loan agents represent both individuals and businesses, offering technical financial advice to help secure loan approvals. Even if banks have previously rejected you, we provide access to a broad spectrum of loan options. Our aim is to enhance the success rate of your loan applications and minimise rejections.
2. Over 10 Years of Experience
With over a decade of experience and current banking knowledge, we excel in securing personal, business, mortgage, and collateral loans, navigating challenges like CTOS/CCRIS, and guiding clients confidently towards successful loan approvals.
3. One-Stop Solution
We provide a one-stop loan service, compiling various options from banks and credit institutions for you. Simply submit your income statement, assets, liabilities, employment record, and credit history, and we’ll handle the collateral and documentation to streamline your loan approval process.
4. Full Financing with 100% Bank Loans
We ensure 100% bank loan availability to provide full financial support, making it easier to achieve your goals and build a positive credit history.
5. No Upfront Payment Required
Our no upfront payment policy is designed to ease your financial journey, allowing you to start your investment without initial costs, reducing immediate burden and demonstrating our commitment to your satisfaction and trust.
Can’t Afford Credit Card Payments – FAQs
Many people face similar challenges when they can’t afford credit card payments and have questions about how to navigate their financial difficulties.
In this FAQ section, we’ll address some of the most common concerns and provide clear, practical advice on what to do if you can’t afford your credit card payments.
Credit card companies are unlikely to forgive the full amount of your balances unless you file for bankruptcy. However, there are other ways to reduce your debt in a reasonable amount of time.
For instance, a debt settlement programme may allow you to have a portion of your credit card balances forgiven.
If you can’t afford credit card payments because you have no money, here are several options you can consider:
– Use a balance transfer credit card.
– Consolidate debt with a personal loan.
– Consider asking family or friends to help you manage your debt.
– Pay off high-interest debt first.
If you close a credit card with an outstanding balance, you remain responsible for repaying that debt. The card issuer will continue to send statements, and interest will continue to accrue on the remaining balance.
