How Credit Card Debt Can Quickly Spin Out of Control

In this cashless society, relying pretty much on credit and debit cards, especially with the ease of purchases between online shopping and swiping in-store, as the purchases continue to pile up, so does the credit card debt.  When you carry a balance over to the next month is when things can start to add up, now that you are paying interest and the monthly payment will need to be large enough to cover interest and chip away at the balance, before credit card debt can spiral out of control.

Charging to Earn Rewards

Rewards is probably one of the best perks when it comes to using a credit card, earning free money on the purchases you would be making anyways, whether that is in the form of airline miles, points to redeem gift cards, or even get a cashback check each year.  The problem is, once you start to see the rewards adding up, you may be tempted to start making extra purchases just for the rewards.  If you start to carryover a balance and pay interest, that would probably outweigh any rewards you would get in return anyways.

Lack of Emergency Fund

You never know when a large unexpected charge will come up, whether it’s an auto repair, home appliance replacement, or vet bill, that can put a strain on you if you don’t have the available funds and need to put on a credit card, trying to figure out how and when to pay back.  If you can set aside a few months’ worth of reserves, that would give yourself a nice cushion in case something comes up.  From there, saving your retirement would be your next bet, whether that’s a  401k vs ira, it may be best to consult a professional on your best option.

Using Credit Instead of Cash

When you pay with cash you actually see the money leaving your hand and going into the cash register, watching your hard-earned money leave pretty quickly, probably enough to make you wonder if the purchase is worth it in the first place, going back to the days when you would actually think about it and come back to finally make the purchase.  These days you can just swipe your card with no worries, that is until the bill comes in and scares you, but there really is no second guessing when it comes to swiping your credit card.

Not Tracking Purchases

If you don’t know where your money is going, now is the perfect time to take a look at last month’s credit and debit card statements and actually go line by line and see what and where all of your purchases were.  From there you can take a look to see which ones were necessary monthly bills and expenses, and what probably could have been avoided.  A good place to start would be looking at food expenses, specifically going out to eat, something you could have avoided if you would have gone grocery shopping and prepared your meals at home, for a fraction of the cost.

Speak Your Mind


Read previous post:
How to Confidently Invest in Forex

Forex, short for foreign exchange market, had gained momentum in the past few years. Previously Forex was traded mainly by...