Credit Card Addiction
Let’s talk credit card addiction – credit cards – those magic pieces of plastic. For some, it’s a handy way to pay bills online, earn bonus travel points, and accrue good credit. For others, it becomes a burden of debt to climb out of. And for others still, it’s far more than a source of debt, but an addiction.
With promises of cash back, travel rewards, no-interest periods, and alluring offers of “fast cash,” credit card companies reel in new customers every day, as they add to the stack of plastic in an already overtaxed wallet.
Have you run up credit card debt in the past, to the point that it could be classified as an addiction? You are not alone. According to Time, “On average, an American between the ages of 18 and 65 has $4,717 of credit card debt.” And those are just averages.
Credit card addiction is as real as any other addiction, and can manifest itself in a collection of cards (known and/or hidden from family), compulsive spending, denial and rationalization, unpaid credit card bills and avoiding mounting interest rates.
Ask Yourself, how would I handle any other addiction?
First, admit there is a problem. Without that admission, nothing can be fixed. Find an accountability partner (a spouse, a parent, a friend, a financial planner) who will help cut off or limit access to the cards, consolidate debt, and implement improved spending and saving habits.
Chances are if the problem has been going on long enough, there are already people in your life who stand ready to help you make better decisions.
Maybe you’re worried you’re on the verge of credit card addiction, but need some fresh perspective on your finances. Try not using your card for a week and ask yourself these questions:
- Do I spend less with cash?
- Am I using too much of my line of credit?
- Did I think less about purchasing items?
Credit card usage shouldn’t exceed 30 percent in a billing period, especially if you want to keep a great credit rating. If you spend noticeably less with cash, and consistently surpass the 30 percent mark, it may be time to make big changes to your credit card uses to avoid bigger financial problems in the future.
Here are some other questions to ask yourself to measure proper credit card usage:
Am I using the right card?
Do you have the right card for your situation? Truly evaluate what your budget can handle and pick a card that meets your needs.
Use separate cards for online and store purchases, or bills versus recreation versus food. It may be time to eliminate all but that one card and limit your options for extending credit.
Do I have the right card for the right need?
In an article from earlier this year, Ethan Wolff-Dunn for Money.com writes, “Only 35% of credit card users don’t carry a balance–they pay off their bill every month, like you’re supposed to. They use credit cards for convenience, and perhaps to generate bonus points and rewards, not because they need to borrow.” Lending creditors look closely at this.
But that’s not all…
Find out when your financial institution reports to the credit bureaus. Some report the last day of the month. If you pay in the first week, it’s sending a bad signal to the credit bureau. Try to have the balance paid down before their reporting goes in.
Have specific things you use your card for, and specific things you use cash for. For example, some people set up recurring bills and expenses to be paid via credit card, and use cash for other things.
Ask yourself, is it necessary to use a card? Only use a card on big purchases that you research and plan for. Make an effort to use cash for most everything else.
View your credit card bill as any other bill that “should” be paid in full each month. Less burden, less stress, better credit score.
What does this mean for you?
Credit card debt and addiction doesn’t have to ruin your finances or control life. With a little diligence, planning, and accountability, you can restore your finances and take back control of your life. Think about it, you’ll find life much sweeter!