Saturday, May 23, 2015

How a former 'credit card-aholic' got out of debt


MANILA – When a bank offers you a credit card with a P200,000 credit limit, annual fees free for life, and only proof of employment as requirement, will you accept it?

For then-office employee Aldwin Tanjutco, who admitted that his salary wasn’t enough to buy the things he wanted, the decision was easy.

“I felt empowered because I’ll be able to buy already the things that I want to buy even without earning money first. It gave me the illusion of cash, cash that I don’t even have — unlimited cash. With the card, I just spend and spend and spend,” he told ANC’s “On The Money.”

Tanjutco said he had second thoughts on using his credit card for purchasing items, but he gave in to the temptation to spend.

The high credit limit, unfortunately, became a spending target for Tanjutco.

“I thought about it, but the temptation of spending overcame the intention on how I’m going to pay for it,” he said.

In just five months, Tanjutco maxed out his credit card and found himself in huge debt. He also started to incur a large amount of interest because he wasn’t able to pay his monthly dues.

“I am spending more than I’m earning, so I wasn’t able to pay it in full, in fact I was only paying the minimum. Sometimes, even below the minimum. So you can imagine just how much interest they are charging,” he said.

He began paying off a chunk of his debts with mid-year and Christmas bonuses, and when he felt that he could handle his debt, he asked the bank to increase his credit limit.

His credit limit was increased to P230,000, which for Tanjutco, meant he could spend more.

When Tanjutco again found himself struggling to pay off his monthly bill, collecting agents began calling him, which made him realize the serious situation he put himself in.

Tanjutco said he was given a 25 percent discount to make it easier for him to pay off his debt in a 12-month period.

He learned that credit cards can be your friends, if you know how to use your credit wisely.

The next time Tanjutco applied for a credit card, however, he was denied because of his bad credit.

To clear his bad record, he sought the help of the Financial Consumer Affairs Group of the Bangko Sentral ng Pilipinas (BSP).

“I felt relieved because finally there was hope that I can clear my bad record in terms of credit score. After a day of two, a BSP director emailed me and forwarded my letter to the concerned bank,” Tanjutco said.

“I realized that I shouldn’t spend what I couldn’t pay for. I should spend below my means. If I have debts, 20 percent of what I earn, I just maintain it at that level so that I can manage it,” he added.

Tanjutco, who is now a business owner, admits that he still has debt, but now he knows how to manage it well.

“I felt empowered. I cannot say that I am 100 percent financially free, but I feel that I am moving towards what my goal is,” he said.

Abraham Co, board member at Credit Information Corp., advised consumers that being aware that there is consequence to how you behave financially, will change behavior.

“If you think that there is no consequence and you can get away with this, then you will continue your bad habits. But if you value your future, and know that there would be consequence, then that will change behavior,” he told "On The Money."

Credit Information Corp. board member Suzanne Felix, meanwhile, said credit card owners should be more responsible in their spending to protect their credit record.

“It’s about time as borrowers that we develop that sense of responsibility. The banks are doing their part, so the borrowers should also be doing their part,” she said.

source: www.abs-cbnnews.com