People use credit cards for convenience. It makes buying products and services easier as you don’t have to carry cash around and count or budget the money as you go. You just swipe and swipe and that’s it.
But the convenience comes at a price. It’s very easy to overspend with credit cards. Results from the Survey of Consumer Finances show that there’s an average of $5,700 credit card debt per every household in the United States. This amount is expected to rise even more in the coming years.
So what can you do? Should you stop using credit cards altogether? Well, if you can help it, then good. If not, here are some tips on how to avoid credit card overspending:
Don’t spend as if money is free
Here’s the thing about people who use credit cards: they don’t see it as real money. For them, it’s like a bottomless pit which gives them endless money. But this is far from reality. Remember that buying with credit cards actually cost more than buying with cash because of the interest rates. In a study performed in 2001, it was confirmed that people are willing to spend more on things when using credit cards than when using cash. But it’s very important to remember that your credit card is real money.
Focus on your current balance instead of your credit limit
Don’t always strive to max out your credit card but make sure that you spend within the balance available. Not only will this help you control your purchases, this will also benefit your credit rating. It would be wise to request your credit card company or bank to reduce your credit limit so you can cut back on your spending.
Keep only one or two cards
Juggling multiple cards is a recipe for disaster. The more cards you have, the more you’re likely to overspend. It’s also more difficult to keep up with the payments. Tracking multiple cards and their interest rates and paying them every month is a lot more challenging than if you do all this with just one or two credit cards.
Don’t let emotions get the better of you
A 2008 study reported that people are more likely to overspend when they are sad or lonely. In this study, participants were asked to either watch a sad video clip or a neutral one. Those that watched the sad video clip were willing to spend 300 times more on their purchases. Emotions are obviously a big factor in people’s spending decisions. So if you’re feeling lonely or bored, don’t go shopping. You’ll only regret it later on. Find other ways to feel happy, one that doesn’t involve making poor money decisions.
There’s nothing wrong with using credit cards. But you have to always be careful about your purchases and spending activity. You don’t want your credit cards to put you under a large debt.