What is High Credit Card Utilisation, and Why Does it Happen
From a Malaysian bank’s perspective, if your credit card balance exceeds 70% of your credit limit and you’re only making minimum payments, you’re considered to have too much debt.
Ideally, you should pay your outstanding balance in full before the due date. This way, you can enjoy the benefits of credit card rewards without paying interest.
High credit card utilisation doesn’t happen overnight. If you’re dealing with high usage, it’s likely due to one of three reasons:
1. Unexpected Expenses
Something drastic may have happened, such as paying for a medical emergency, gambling, or lending money to a friend who promised to repay you before the next due date.
2. Gradual Debt Accumulation
High utilisation can also be the result of bad habits, where the debt slowly grows over time. Many people fall into this trap because they use their credit cards as an emergency fund.
3. Spending Beyond Your Means
This occurs when you consistently make purchases that exceed your financial capacity. It often involves falling for merchant promotions that encourage overspending.
For example, “spend over RM300 and get a free item” or “spend over RM1,000 and receive a bonus.” Another example is frequently dining at expensive restaurants or cafes, where a single drink might cost RM20 or more, and a meal can range from RM30 to RM50.
To avoid high utilisation, it’s essential to manage your credit responsibly and avoid relying on it for unexpected costs.
Why Credit Card Debt is the Worst Debt
Credit card debt is one of the worst forms of debt, primarily due to its high interest rate and additional charges. While the interest rate is set at 1.5% per month (18% annually) as regulated by Bank Negara, this is just the tip of the iceberg.
Many credit card holders are unaware of other potential fees that can quickly accumulate, such as over-limit fees, late payment charges, cash advance fees, and foreign transaction fees.
Additionally, the minimum payment requirement is 5% of your total balance, which can significantly strain your finances.
The reason banks require this minimum payment is to prevent credit card debt from becoming bad debt. By mandating that you pay at least 5% of your outstanding balance, banks aim to help you reduce the debt more quickly. However, this also means you’ll have much less of your earnings to cover other expenses.
For example, if you earn RM10,000 per month and already have RM5,000 in loan payments (e.g. RM3,000 for a house loan, RM1,000 for a car loan and RM1,000 for a personal loan) and owe RM100,000 in credit card debt, your minimum payment would be RM5,000.
Even if you manage to pay this, you’ll likely have no money left for essential daily expenses, forcing you to rely on your credit card again. This creates a vicious cycle of debt, often referred to as a debt spiral.
These essential expenses include daily meals, petrol, toll charges, parking fees, insurance premiums, clothing, and social life spending (such as business networking or entertainment). As you continue to use your credit card for these necessities, the debt grows, making it increasingly difficult to break free from the cycle.
8 Benefits of Consolidating Credit Card Debt
1. Reduced Monthly Payments
Consolidated loans typically offer lower monthly payments than the combined minimum payments of multiple credit cards, easing your financial burden.
2. Lower Interest Rates
Credit card interest rates are high. Consolidating balances into one loan with a lower interest rate saves money and reduces the overall cost of your debt.
3. Simplified Debt Management
Consolidation merges multiple payments into one, making it easier to manage and reducing the risk of missing payments.
4. Fixed Repayment Terms
With fixed terms in your consolidated loan, you know exactly when your debt will be paid off, making budgeting and financial planning easier.
5. Improved Credit Score
By paying off high-interest debts and lowering credit utilisation, consolidation can improve your credit score over time.
6. Potential Savings
Consolidating your credit card debt boosts cash flow, allowing you to pay off debt faster or save for the future.
7. Financial Stability
With predictable payments and a structured plan, you’re less likely to miss payments or fall back into the cycle of credit card debt.
8. Peace of Mind
Consolidating your debts provides a clear path to becoming debt-free, significantly reducing financial stress and anxiety about your future.
Main Reasons Why Your Loan is Rejected Due to High Credit Utilisation
When you have a lot of credit card debt, two main issues could be preventing you from getting a loan:
1. High Credit Utilisation Ratio
Your credit utilisation ratio is how much of your credit limit you use. If you’re using more than 70% of your available credit, it shows banks that you rely too much on credit.
For example, if your credit card limit is RM10,000 and you have a balance of RM8,000, your utilisation is 80%. This high ratio suggests to lenders that you are overly reliant on credit, potentially lowering your credit score and making future loan approvals more difficult.
2. Increase Debt-to-Income Ratio
Your debt-to-income ratio shows how much of your income goes towards paying off debt.
For example, if you earn RM10,000 and RM7,000 goes to loans and credit cards, banks will see that you don’t have much disposable income left to repay another loan.
Case study:
- Monthly income: RM10,000
- Debt service ratio (what banks calculate): 70%
- Your disposable income for loan payments: RM7,000
Now, let’s say you already have:
- Housing loan: RM2,500
- Car loan: RM1,500
- Personal loan: RM1,300
- Credit card minimum payment (5% of RM30,000): RM1,500
That adds up to RM6,800 in debt. If you want a new loan with a monthly repayment of RM1,000, your total debt becomes RM7,800, which is higher than your disposable income of RM7,000. This is why your loan gets rejected.
Our Solution for Individuals with High Credit Card Debt
As a certified loan agency, Bluebricks offers a unique solution for clients with high credit card debt. Here is how we do it:
- Bluebricks will pay off your current debts (credit card debt, personal loans, etc.)
- Wait for your CTOS (credit report) to update
- Apply for a new loan with a bank that has a high approval chance
This method can be effective because once Bluebricks clears your existing debts, banks will view your financial burden as lower. With a reduced DSR, you are eligible to apply for a new personal loan with potentially better terms.
Before settling your debts, Bluebricks will confirm your desired loan amount, the interest rate, the duration to repay it, the monthly instalment, and your ideal cash-in-hand amount.
If You Have the Money to Settle Off Your Debt, Do You Need Bluebricks?
The answer is both yes and no, depending on your situation. Let me explain with two examples.
Example 1: Sarah’s Case (Yes, You Need Bluebricks)
Sarah had RM50,000 in credit card debt. She borrowed RM60,000 from a friend to pay off her credit cards, leaving her with an extra RM10,000 for other expenses. She then applied for loans from three banks, but only one approved her for RM38,000, while the other two rejected her.
When she came to Bluebricks, we informed her that if she had come to us first, we could have secured her a loan of RM120,000. Unfortunately, due to her multiple loan applications, she now has to wait months before she can apply for another loan to repay her friend.
In this case, Sarah regretted not engaging with us sooner.
Example 2: Zaidee’s Case (No, You Don’t Always Need Bluebricks)
Zaidee approached us because he wanted a personal loan to consolidate his credit card debt. We advised him to borrow RM20,000 from someone to settle the debt first, which he did by borrowing from his mother.
Afterwards, he applied for an RM25,000 personal loan and got approved, as we knew he could secure it easily from any bank. In this situation, Zaidee didn’t need our services because he had the resources to manage the process on his own.
We didn’t charge him anything since we didn’t provide significant help. He simply wasn’t aware that he could handle it himself.
When Do You Need Bluebricks?
Bluebricks isn’t just about providing funds. Even if you have the financial means to settle your debts independently, partnering with a loan agency like Bluebricks can offer significant advantages.
Our expertise in navigating Malaysia’s complex banking landscape can help you secure the best possible loan terms and ensure a smooth debt consolidation process. Here is why:
Bank Selection
With numerous banks in Malaysia, each offering different products and terms, Bluebricks can guide you to the most suitable option for your specific situation.
Easier Approval
Bluebricks can help identify banks that are more likely to approve your loan and determine the maximum amount you might be eligible for.
Contingency Planning
If your preferred bank does not approve the loan due to a high debt-to-income ratio, Bluebricks can quickly pivot to alternative options.
Terms Negotiation
We help you find banks offering the lowest interest rates and suitable repayment periods for your financial profile, which can significantly lower your monthly payments.
Risk Mitigation
If you are borrowing to settle existing debts, Bluebricks can help calculate if the new loan terms are truly beneficial and ensure you have a viable repayment plan.
However, if your situation is manageable, like Zaidee’s, we’ll honestly tell you that you don’t need our services.
Our fees are for solving bigger, more complex problems—and that is where we excel. Impressed by our transparent approach, Zaidee recommended our services to his friend Aiqal, who was in need of our financial assistance.
Eligibility for High Debt to Income Ratio Personal Loans
Mr N approached Bluebricks seeking help after being rejected by three banks for a loan due to high credit card debt and an excessive Debt Service Ratio (DSR).
His situation:
- Total debt: RM155,000 (RM95,000 credit card debt + RM60,000 personal loan)
- Monthly payments: RM5,500
- Disposable income: RM300
- Credit card usage: Over 90%
- DSR: 93%
Mr N considered joining the AKPK debt management programme, but the restrictions, such as being unable to use credit cards for up to 10 years, made him reluctant. That’s when he found Bluebricks through a Facebook ad and decided to give it one last try.
Our solution:
After providing the necessary documents, including his CTOS report, payslips, bank statements, and EPF details, Bluebricks quickly assessed his situation. We proposed a solution within three days, which involved reducing his DSR by paying off a lump sum of his credit card debt and personal loan.
The result:
Bluebricks helped him clear RM95,000 of his credit card debt, reducing his credit card usage to zero and significantly lowering his DSR.
As a result, his monthly commitment dropped from RM5,500 to RM3,600, and his disposable income increased from RM300 to RM2,200.
Additionally, Bluebricks helped reorganise his RM155,000 debt, and he received RM20,000 cash in hand for emergencies.
This solution not only relieved his financial burden but also gave him more financial flexibility.
Mistakes Our Clients Make with Credit Card Debt
Avoid these pitfalls to prevent high credit card debt and the need for debt consolidation:
1. Making Minimum Payments Only
Paying only the minimum amount keeps the debt lingering due to high interest. It also harms your credit score if your card usage exceeds 50%-70% of your limit.
2. Continuing to Use Credit
Using credit cards while trying to pay off existing debt makes it harder to clear the balance, leading to demotivation and more debt.
3. Paying Debt with More Credit
Taking out new credit cards or loans to pay off debt doesn’t solve the issue and can create a cycle of borrowing without reducing overall debt.
4. No Repayment Strategy
Paying a small amount on multiple debts without a focused plan is ineffective.
Use the debt avalanche (paying the highest interest debt first) or debt snowball (paying the smallest debt first) methods.
5. Closing Accounts Immediately
Closing a credit card right after paying it off can lower your credit score. While it might seem logical to prevent future debt, closing an account can negatively impact your credit score by reducing your credit and increasing your credit utilisation ratio.
Instead, only close cards with high annual fees and leave others unused.
6. Missing Payment Due Dates
Some people wait until after the due date to pay, leading to late fees and higher interest rates.
Paying at least 5% of your balance before the due date is essential to avoid penalties and damage to your credit report.
Frequently Asked Questions (FAQ)
Disadvantages:
• Increases your total debt due to fees to a loan agency like Bluebricks
Advantages:
• Reduces monthly financial burden
• Lowers monthly instalments
• Increases monthly cash flow
• Enables saving and investing
• Makes instalments more affordable
• Reduces interest rates (potentially from 18% to 3–12%)
• Provides a clear debt repayment timeline
• Improves CTOS/Experian score
• Enhances future borrowing capacity for major purchases (e.g., houses, cars)
Thinking about getting a personal loan when you are already in debt? Here is what we suggest:
a) Figure out why you need the loan:
• Need quick cash? (Bluebricks takes at least 30 days because of high commitment factors)
• Want to lower your monthly payments?
• Need more money in your pocket each month?
• Trying to fix your high debts fast? (Maybe for a credit card, car, house, or job requirement)
• Tired of banks calling you about money?
b) Is it an emergency? If not, you might want to slowly clear your debts first before borrowing a personal loan.
c) Take a good look at your spending. Where is your money going?
d) Remember that loan agencies like us can help, but we are not a permanent fix for money troubles.
If none of this sounds like you, you could either work on clearing your bad credit slowly or check out AKPK to help manage your debts.
For high credit card usage clients seeking favourable loan terms:
• Banks are selective when giving low interest loans. Usually, only government workers or employees in multinational corporations (MNCs) get monthly interest rates as low as 2%
• Most banks offer a repayment period of 5 to 7 years. To obtain a 10-year loan tenure, it depends on the client’s employment status and overall financial profile.
• Getting cash in hand depends on your financial documents and CTOS report. We will need to check these first.
It can take anywhere from 30 to 90 days, depending on:
• Your current bank’s record update speed
• The loan amount requested (larger amounts take longer)
Bluebricks calculates the loan amount you can borrow based on:
• Your credit report
• Your income range
• Your DSR
Just provide us with the necessary documents to receive a potential loan amount estimate within 3-5 days.
• We do not charge you interest on the money we use to pay off your debts.
• No guarantor or collateral is required.
• No upfront fees (e.g., lawyer fees, document fees, account opening fees).
Eligible applicants must be:
• Salaried employees with income above RM3,000
• Receiving EPF deductions
• Employed for more than 6 months and confirmed staff
Bluebricks does not assist:
• Clients with legal cases/summons
• Business owners
• Full commission-based workers
• Those with basic salaries below RM3,000
The service fee is between 15–30%. The following factors are considered in determining the fee:
a) Issues in your CTOS report:
• What problems need to be settled?
• How much money is needed to settle?
• After settling high credit card debt, how many banks can we work with?
• After settling high credit card debt, how much of a loan can be borrowed?
b) Your income situation:
• Is your income stable?
• How much is your income?
• What industry do you work in?
c) Is your debt service ratio (DSR) over 50%?
d) Does the lender consider your risk high or low?
e) How much cash-in-hand do you need?
i. Collect credit reports and full income documents.
ii. Provide a bank proposal and calculation breakdown within 3-5 days.
iii. Sign agreement and perform debt settlement.
iv. Wait for CTOS update and submit the loan application.
v. Receive bank approval; client repays Bluebricks the fund and service fee.
vi. Set up monthly direct payments to the bank.
