Credit cards are useful tools when used wisely, but many people unknowingly cross into the danger zone and become too reliant on them.
It is all too easy to start putting regular purchases on your plastic and worry how to pay it off later.
If you can answer yes to any of the following questions, chances are you are too dependent on credit cards and need to start relying more on your debit card or cash.
Do you rely on your credit card to make it until your paycheck?
When you find yourself running out of money before your next paycheck, the easiest way to squeak by until your next check comes is to put everything on your credit card. This pattern gets dangerous quickly.
If you are stuck in this trap, it is imperative to cut back your spending or find additional sources of income until you can stop relying on your credit cards to get by until the next payday.
“The more you put on your card,
the larger the bill you have to pay.”
Do you end every holiday season in debt?
Many people find they are not able to get through the holiday season without having to put gifts on their credit cards. This leaves you with a frustrating debt hangover at the beginning of the year that can be hard to get rid of.
To stop this from happening every year, you must save for the holidays throughout the year, or at least start saving several months in advance.
Consider transferring a small amount of money into savings or putting some cash aside in an envelope every month, so by the time the holidays come, you do not have to put presents on your credit card anymore.
Do you have to put unexpected costs on your credit card?
When your car battery dies or your dishwasher breaks, do you always find yourself having to put it on your credit card to pay off later?
If so, it means you are not saving for emergencies and are living too close to the bone. It is time to build an emergency fund.
Begin by setting up an automatic savings plan. It is wise to set a small amount, such as $15 or $30 per week, to transfer from checking to savings. This will add up quickly and give you a cushion so you are not so dependent on credit cards the next time you have an unexpected expense arise.
Do you spend more than you would with cash because you are getting rewards or discounts?
It can be hard to say no to a good deal. Retail credit cards give us large discounts on purchases when we sign up for them and for simply using them.
Sometimes the stores run additional specials and send us coupons. It becomes tempting to take advantage of these deals, but when you can’t actually afford it or do not really need it, you are losing money.
It is important to avoid the temptation to spend just because you have credit card rewards or discounts. Try to avoid shopping for deals unless you actually need something specific, like a new white shirt.
Photo source: bp.blogspot.com.
Editorial Note: Opinions expressed here are the author's alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.