Why your credit card debt grows even when you pay on time

“Why is it that I pay my credit card every month on time but my outstanding debt seems to be getting bigger and bigger?”

That was the question Isabela kept asking.

Isabela is not her real name. I met her after KCLau invited me to share about freeing up monthly cash flow through debt consolidation.

She was a senior manager in a multinational bank in Malaysia. At work, she managed 20 staff. At home, she had seven children.

It was like having two jobs.

She was busy managing everyone else, and she had very little time left to go through her own finances. Her income was good, but she had reached a point where she was short of more than RM5,000 a month.

How would you feel if you were already paying your cards regularly and still could not understand why the debt kept growing?

First we looked at the whole month

When we sat down together, loan repayments stood out immediately. She was paying more than RM11,000 a month towards her loans.

That was a large part of why she could not get through the month on her income.

But it still did not explain the question troubling her: why were the card balances growing when she paid them on time?

So we went deeper.

There were four credit cards. Some had recurring payments, and there were several instalment plans. Each card had an outstanding balance.

Four cards did not tell me enough by itself. I needed to see what was going through each one and how she decided what to pay.

This was where we found the blind spot

I organised the card details and the monthly payments.

For three of the four cards, Isabela was paying about RM3,000 each. She was choosing the amount by gut feel, based on what she thought she could manage.

RM3,000 sounds like a decent payment, right?

Now look at what was happening on one of her cards:

Can you see it now?

She was paying RM3,000, while the instalments and spending recorded separately in the case added up to RM5,201.

The payment was short by RM2,201 before other adjustments. So another month passed, she made a payment, and she still had more to deal with afterwards.

If this sounds familiar, check your own statement carefully. An instalment may already be included in a billed total. Reconcile the items rather than adding the same amount twice.

Paying on time and paying in full are different

This was the shift I wanted Isabela to understand.

She was keeping track of when she paid. She had not reconciled the payment with what needed to be paid in full.

For your own account, look at the full billed statement amount, the minimum required payment and the due date. A fixed payment chosen because it feels manageable may leave part of the billed balance behind.

Paying only the minimum can also leave a balance carrying finance charges. The exact conditions depend on the card and any plans you have taken.

And when I say “in full”, I am talking about understanding and settling what is billed under your card’s terms. That is different from automatically paying off every future, unbilled instalment in advance.

Once a balance carries into the next month, it gets harder to work out what your payment is covering. Then new spending and recurring charges arrive too.

You pay again, but you still cannot see the whole picture.

That is why I wanted all four cards laid out together.

There was something for me to learn too

I have usually cleared my own card balances each month. If you do that, you may never notice how confusing the position becomes when balances, instalment plans and new spending overlap.

Working through cases like Isabela’s made me realise how easily this blind spot can stay hidden.

She had a good job. She understood banking. She was making payments. Those things had not protected her from this particular problem.

So what did we change

There were two parts to the work: the existing debts, and how her money was being managed each month.

We used ICE JAR to look at the ongoing allocation. If the household kept spending more than the income could support, changing the loans alone would not hold.

Then we examined the debt structure.

You may remember that James had properties that had appreciated, which gave us a property-based consolidation option to examine in his case.

Isabela had bought her properties more recently. There was not much capital appreciation to work with. So we could not just copy James’s arrangement.

We looked at what I called debt replacement: replacing the card debts with an arrangement intended to reduce the financing cost and monthly repayment pressure. The calculation method, term and total cost all needed to be considered together.

What happened within a month

In the case I shared, her total monthly loan repayments came down from RM11,648 to RM2,594.

That was RM9,054 less going out each month.

She was very relieved and kept thanking me. With the demands of work and a family, you can imagine what it meant to have that monthly pressure reduced.

I want you to see how we arrived there. We found the mismatch in the cards, checked the wider cash flow, then looked for an arrangement that fitted her circumstances.

Having property did not mean the same solution would work for both her and James. Paying a large amount did not mean the card balance was being fully cleared.

Those were the details we needed to uncover.

Before your next card payment

Take out every card statement and the instalment schedules. For each card, compare the full billed amount, the minimum required payment and what you actually paid. Then look at the combined demand across all the cards.

Can your income cover that demand after the rest of your commitments and living costs?

If you are not sure what the statement amounts mean, get the issuer to explain the account details. If you want to understand how the cards fit into your wider debt and deficit problem, bring that picture to me.

Start with Money X-Ray, and let’s work out what is happening before you choose the next step.

Isabela is a pseudonym. This is an actual historical case. Her repayment reduction was specific to her circumstances and does not guarantee the same result or total interest saving for another person.

P.S. AKPK provides financial counselling and debt-management support. My approach starts with your full cash flow, debts and assets, then uses Money X-Ray to assess a suitable direction: education, coaching or DCS4U support. Where workable, we can examine options outside AKPK’s debt-management programme. We first need to understand your case; changing the loan without understanding the monthly gap can leave the problem unresolved.

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