You would think it would be hard not to know when you are getting in trouble when using credit cards but the truth is that it is very easy to overextend ourselves with credit. Not only that but it is also very easy to ignore warning signs because it’s very hard to admit that we have debt problems.
So here are some warning signs that you might be getting in danger territory:
- You can only afford to make the minimum payments on your credit cards
- You are already maxed out on a few or maybe all of your credit cards.
- You use your credit card with the intention to pay it off at the end of the month but when the time comes there just isn’t enough money in your bank account to pay off what you charged.
- You use your credit cards to pay for everyday expenses such as groceries or gas, not because you want to take advantage of any incentive plan but because you don’t have any money in the bank to afford those purchases today.
I have to say that sign #3 is the reason why I avoid using credits cards like the plague. Using credit cards creates a false sense of financial security. A current example, we are using my husband’s credit card to pay for gas because he gets 5% cashback bonus, and with the current gas prices a 5% discounts sounds pretty good. I still have a category in our budget for gas but because we are delaying payment by putting it on the credit card, our cashflow is artificially padded for a few days until we pay the credit card bill. But, what happens during those days? we look at our bank account and go: “there’s plenty of money in there of course we can afford to buy this widget!” and we buy said widget and when the end of the month comes we have to be careful with our spending in order to pay off the gas balance. So, I am making it my job to make sure that we pay the balance on this credit card every 15 days, to avoid any problems.
But that’s not the only reason I avoid using credit cards. I also think that if I can’t afford to pay for something using money from my bank account then I should just not buy the item or wait until I have the money to get it. But what are common excuses we use to rationalize not doing so?: “oh, it was on sale!”, “it was a great deal”, “it made no sense to wait and get it, then I would have lost the discount.” But I have been there and done that and what I have learned is that it takes a lot of self-control to keep tabs on how we spend our money.
Next time: signs that you have bitten more than you can chew.