While there are some situations in which an unexpected major expense (such as a medical emergency) could land you in debt, most of the time it’s bad spending habits over a long period of time that really dig the big financial holes for people. However, if you’re able to recognize these habits, you could stop yourself from piling up credit card debt before your situation gets dire.
Here are some of the most common bad spending habits that lead to credit card debt:
- Spending more than you earn. This is a lot easier to do than you might expect, especially in today’s society of easy credit and the number of available payment methods. Monthly expenses rack up quickly, and if you’re not able to control your impulse purchases or curb the amount you spend on non-necessary items, you could quickly find yourself dipping into your savings, borrowing money from other people and using credit irresponsibly.
- Spending money you don’t have yet. Even if you know you’re going to eventually have the money to pay off your bills, you can still get into trouble by spending money you don’t have yet. Taking out payday loans can be a big mistake because of the huge interest rates they have, and over-drafting your account could damage your credit score and force you to pay bank fees.
- Using credit for regular purchases if you can’t pay your bills. Using credit for regular purchases is a great idea if you’re always able to pay your bills in full and on time, because you establish good credit and don’t worry about interest. But if you’re unable to make your payments each month, you’re only digging a deeper hole by continuing to use credit for such things as groceries and utilities. Opt for cash instead.
- Using loans to pay off loans. If you’re using your credit cards to pay off other loans, you’re likely making matters worse because you’re essentially transferring your debt from one source to another. Because credit cards have significantly higher interest rates than most other types of loans, this could actually make your debt problem far worse in the long run.
For tips on how to get yourself out of debt, contact the team at Money Mastery today.