6 Warning Signs That You Need to Stop Using Your Credit Cards
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In romantic relationships, career choices, even struggles with drugs and alcohol, professionals often ask us to look out for warning signs. Well the same should be done with credit cards. (See also: 12 Habits of Highly Responsible Credit Card Users)
According to the Federal Reserve, average household credit card debt in the U.S. is more than $15,000 in 2014. If you have credit card debt anywhere near that high, it's probably a sign that you should cut up your credit cards right this minute. But that kind of debt doesn't pile up overnight, and many of the warning signs are much more subtle.
Here are six signs you should kill your credit card sooner rather than later.
1. You Shop When You're Sad
They don't call it "retail therapy" for nothing. Research has found that hauling something new home at the end of a hard day really does have a "lasting positive impact on mood." In this same study, 62% of respondents also admitted to buying things to cheer themselves up. But there's a catch. It also makes you lonelier and less able to form meaningful connections with the people around you. It's what economists call a "loneliness loop." In other words, it's something you can get stuck in. If you're using your credit card to dig yourself out of an emotional hole, you may end up in a huge financial one instead.
2. You Spend More Than You Mean To
When you're faced with temptation while holding a card that can buy $10,000 worth of stuff in a single swipe, any budget you may have set for yourself can easily be "forgotten." Research suggests that overcoming the urge to overspend on a credit card is a tough hurdle for many psychological reasons, but they all boil down to the fact that it simply hurts less to pay with credit (at least in the short term.) If you are often shocked by the size of your credit card bill (even if you're still able to pay it or pay most of it), it may time to kill your credit card for a while and learn to shop on a budget.
3. You Don't Remember What You Bought
Have you ever had a look at your credit card bill and been totally baffled by several of the purchases? When did you spend $50 on a restaurant meal? What on earth is that $250 charge for? Did you really go out shopping three times in one month? Credit card bills tend to come well after we've enjoyed the goods they purchased, but if you can't remember much of what you've bought, you're probably spending on things that aren't that important to you. Over time, those kinds of shopping habits can lead to real financial trouble. If your credit card bill shocks you, it may be time to do away with that card before the balance does you in. (See also: How Your Credit Card Statement Keeps You in Debt)
4. You Shop for Points You Can't Afford
We've all heard stories about people who've scored 'round-the-world, all-expenses-paid vacations by racking up credit card rewards and flight miles. It happens. Those people really do exist. But trying to emulate them is a bit like signing up for your first marathon and expecting to be in the lead; it isn't something that most people are able to achieve. And, what's much more common than people who get free stuff by using their credit cards are people who pay thousands and thousands of dollars in interest. If you can find a decent rewards card and pay it off in full every month, go ahead and rack up those points for a beach vacation. If you can't, you're more likely to end up broke, in debt, and at home. (See also: Beginner's Guide to Miles and Points)
5. You Often Use It to Buy the Basics
The golden rule of responsible credit card use is to avoid buying more than you can afford. If you often feel the need to use a credit card to buy groceries, gas, or other daily essentials, some part of your financial life is most likely off balance. Whether you need to earn more money or spend less of it on non-essentials, using a credit card to make up for shortfalls will only make the problem much worse. Credit cards are best used as a convenience, not a crutch. If you're using a card to prop yourself up and pay for everyday expenses, it may be time to kill it.
6. You Can't Bear the Thought of Putting It On Ice
Shopping — particularly when it's done using a credit card — can be addictive. If you're struggling to keep your debt under control and are making a bunch of disastrous financial decisions to do it, you probably know that your credit cards are a bad thing, that you should cut them up, throw them out, or at least shove them to the very back of the freezer where they won't tempt you as much. But, maybe, somehow, you just can't bear to do that. You don't want to go out without a credit card in your wallet. You don't want to remove the option. That sense of dependence is a serious red flag, and one that suggests that you should kill your credit cards before they snuff out any financial stability you may have left. If you can't do it alone, consider seeing a credit counselor for help.
Killing your credit card can feel like a tough decision — until you consider the consequences. The real killer is the high-interest debt that credit cards can accumulate. If you're on a path toward financial destruction, it's time to wipe out those credit cards — before debt takes a swipe at your personal finances.
How do you control credit card spending? Please share in comments.