Slow Down in Using Your Credit Card
There’s nothing wrong with having a credit card. For most of us, it represents a way to shop smartly – providing the balance is paid off in time to avoid interest charges.
Credit cards usually provide a greater level of consumer protection compared to debit cards, and enable purchases to be made when the cash isn’t immediately available.
The problem is that they can become rather addictive. The ability to make purchases on credit often detaches people from the value of money and their budgetary constraints. Consolidating your credit card debt can help make repayments more manageable if they do become out of control, but it’s important to get into better spending habits if this is to improve your financial situation in the long term.
So, how do you spot when you need to slow down in using your credit card or stop using it entirely? Here’s five warning signs:
1. You can’t remember what you’ve bought
When you receive your credit card bill, are you ever perplexed by some of the purchases? That £50 lunch last Thursday, for instance – why was it so expensive? And do you really shop for clothes every single weekend?
Over time, poor financial habits will lead to trouble, and if you struggle to recall what you bought or the reasons for the purchases, it might be time to review your spending.
2. You’re having trouble paying other bills
If you suddenly find yourself struggling to pay the gas bill or the window cleaner, your credit card might be to blame.
People often set up a direct debit that automatically pays off the entire balance of their card each month, and while that’s usually good practice, your bank balance will soon be swallowed up if your credit card spending gets out of control.
Monitor your credit card balance carefully; if you budget correctly, you should know the theoretical limit you can affordably spend on it each month, and keeping below that will enable you to pay your other bills and retain a surplus for emergencies.
3. You’re juggling debts
It’s not uncommon for people to rely on credit cards to pay off other debts.
Perhaps you missed a payment for your car loan, or turned to your credit card to pay off an overdraft. In reality, this is simply shifting the debt to the card, and can quickly turn into a problem if you don’t address the debt itself.
Thankfully, a debt consolidation loan could help by bringing all of your debts under one monthly payment; it’s definitely worth considering if you’re currently juggling your debts.
4. You’re tempted to sign up for another card
Having more than one credit card isn’t a problem if you ensure the balances are paid off each month and don’t spend beyond your means.
However, if you’re tempted to sign up for a second credit card and can’t put your finger on a why, it might simply be because you’ve maxed out the current card and feel like you need some more head room. This is a time to slow down in using your credit card.
Try and resist the temptation. Adding another card will only result in more debt and leave your other card’s balance to fester and incur large interest charges.
5. You can’t bear the thought of not having the card any more
If, having read the above, you’ve realised there’s an issue that needs addressing but you can’t bear the thought of cutting up your credit card, you’ve probably found the crux of the problem.
Shopping on credit cards can be very addictive, and it may simply be that you’ve become too reliant on yours.
If the thought of giving it up is too much, remind yourself that by doing so you’ll pave the way to a debt-free future. Then, take a deep breath, and reach for the scissors.
It’s worth reiterating that credit cards can be very useful for our personal finances, but it’s incredibly easy to fall into bad habits.
If any of the above feels familiar, it might be time to review your credit card usage!