It’s no secret why so many Americans are in debt up to their eyebrows. The moment a teenager reaches his or her eighteenth birthday; if not sooner, credit card companies begin sending offers for credit cards. Some of the offers are extremely tempting, screaming promotional and introductory rates of 0% for the first six months, or balance transfer rates designed to help you save money on existing debt.
Many first time credit card users are not fully aware of the problems that are caused by credit card spending; they think- “Wow, great, I can buy now and pay at the end of the month after I get my paycheck!” Then of course, as seasoned credit card users have learned, when the end of the month comes, there are other things that must get paid. Your car needs gas. Your car insurance and/or loan payment is due.
You need a pair of shoes for the wedding of your best friend’s cousin’s daughter. You get the point. Once these other incidentals are paid, you’re lucky if there is enough to pay the minimum payment, let alone the entire balance.
The mindset of the typical credit card disaster user is one of “get it now, deal with it later”. Basically, when one credit card is reaching (or has gone over!) it’s limit, this user just goes about getting another credit card or loan. Sure, usually it’s with the intent of transferring your balance to a new account to obtain a better interest rate and have a single monthly payment, but the trap has been set and you’re walking right into it.
Before long, you’ve got several credit cards, all with balances that you are unable to pay off in a month or two. The interest rates have all skyrocketed because you missed a month’s payment or were late once. Now, when you mail in the minimum payment amount, it isn’t even enough to cover the finance charges and therefore, you’re making payments and still adding to the amount of money you owe.
This is a credit card disaster.
So how does someone get out of the credit card disaster mindset? Once you’ve got several credit cards and not enough income to pay them and your other living expenses, and there are no more creditors crazy enough to give you more money- what then? It’s time to deal with the consequences of irresponsible spending.
If you actually have room on any of your credit cards to spend more, you need to take away the temptation. Cut your credit cards into tiny pieces, and throw them away. Yes, every single one. Don’t save one for “emergencies” because honestly, how many of those credit cards were originally obtained in the event of an emergency? How much of the balance on the credit card was actually put there to cover an emergency expense? This is how you break the credit card disaster mindset. Credit cards are not the best way to obtain money in the event of an emergency; especially when you’ve already spent tons of money using them.
You have to make the decision to STOP using credit cards. It doesn’t matter if it’s a month before the holidays, if it’s a time when you are not making as much money as you’re used to, or you just “need” something from the store. If you can’t buy it with cash, then you aren’t going to get it!
You’re probably thinking you don’t have money to buy anything, and, you’re probably right. That’s what credit cards can do to you. What you need to do is create a plan of repayment. Figure out your monthly expenses and your monthly income. Determine where you can cut costs. Maybe you could save gas and carpool to work? Maybe you can pack a lunch rather than buying one every other day. Make coffee at home and save $2 a day, or $10 a week (or more- depending on how many cups of coffee you drink a week from the coffee shop!) There are ways to reduce your expenses. Find them, and do them religiously. Put the money you are saving into an account or a piggy bank. This becomes your “emergency fund”. It will take awhile to grow, but it will grow with time if you continue to cut unnecessary expenses.
Next, concentrate on paying off the bills that you can get rid of first. You should find your smallest balance, and work at sending that account as much money as possible while still making your other payments, in order to pay it off. Once something is paid off, you have that accounts payment to use to pay more money on another account.
It’s going to be a slow and painful process. Getting out of the credit card disaster mindset is not easy- you are reconditioning yourself and teaching yourself responsible spending habits by not using credit cards any more, and paying off your debt. When you do finally have some breathing room, don’t go back to using credit cards. Put purchases off until you have saved enough to buy them with cash. Don’t fall back into the same credit trap you worked so hard to get out of, and before you know it, you’ll find it doesn’t take long to save for a purchase when you aren’t struggling to make monthly payments each month on old debt!