Credit Card Spending that Leads to Debt

Credit card spending can spiral out of control. Take action to cut spending, and if that doesn't work, look for alternatives.

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IN THIS ARTICLE:
  • Credit card spending isn't necessarily bad nor good.
  • If you are not paying off your credit card debt in full, make changes to avoid the minimum payment trap.
  • If cutting spending doesn't free up enough money to pay off your debt, look for alternatives.

Credit Card Spending and Debt

Are high credit card bills getting you down? Whether you chronically carry a balance, or just carry a balance from time to time, you’re not alone. According to the Federal Reserve, half of Americans carry credit card debt

A Credit Card is a Tool

Credit cards are convenient; you probably know people who don’t carry any cash. Spending money with a credit card can earn you cash back rewards, frequent flyer miles, or other incentive points. Credit card purchases can offer you consumer protections, such as stronger warranty and an easy way to dispute a purchase if there is a problem. These are all positive features. 

Credit cards also can be used unwisely. It is easy to spend beyond your means. A cliché about a crime is that it requires motive and opportunity. Your credit card issuer may offer you a credit limit that is beyond what you can afford, giving you opportunity to get in over your head. A simple desire to buy something can be motive enough to buy something.

There is no crime, and no punishment, if you can afford to pay for your credit card purchases, pay your other bills on time, and put money into savings. If, on the other hand, you pay for day-to-day living expenses with a credit card and don’t pay your balance in full, you short-change yourself by paying interest, inflating the costs of these goods and services. If you’re not careful, you can rack up debt on credit cards, and get stuck in a minimum payment trap.

If all you can afford to pay is the minium payments, you won't be able to put money towards acheiving important pieces of a healthy financial life, such as establishing an emergency fund, buying appropriate insurance coverage, saving for retirement, inor growing your money with investments.

Get Your Financial Health Score

To avoid getting bogged down by credit card spending, read on for a breakdown of some common living expenses that can lead to excessive credit card debt, and how you can reduce them.

Too Tired to Cook?

Dining out is an easy way to eat up your monthly allowance and accumulate unnecessary debt. A TSYS study found that more than a third of consumers use their credit cards when at a sit-down restaurant. Half as many put their fast-food meals and coffee shop purchases on credit cards.

While we all have to eat, food is one of the easier items to budget for. Restricting your dining out is an excellent way to save money. You'll also be eating healthier. Pack a lunch for work and bring a thermos of tea or coffee instead of heading to a café. The amount of money you can save each month is significant. Use a budget app or a micro-savings app to track your purchases and savings, then apply your savings towards your existing debt.

Grocery Shopping

How you grocery shop has a huge effect on your overall spending. Do you charge your grocery purchases? This can have shocking long-term effects on your debt. Reining in grocery spending starts with careful meal planning. Before you hit the aisles, make a list based on your weekly meal plan so that you only buy items you will actually use. This will cut down on food waste, and streamline your shopping process. And never go food shopping when you're hungry.

Buying in bulk or choosing the large size is often cheaper, but that is not always the case. Most grocery stores display the price per ounce on the shelves, often in fine print. Pay attention to this number to get more bang for your buck.  Shop for fruits and vegetables that are in season. Take advantage of discounts, and coupons to shave your grocery bill. If you can work out a weekly budget for groceries, and pay with a debit card or cash, you'll be less likely to pile more debt onto your existing burden.

Gas and Auto Expenses

Cars give great freedom of movement, but are also a significant living expense. Paying for gas at the pump is a necessity, but how you pay makes a big difference in your financial picture. Consumer Reports shows that paying with cash at the pump often results in big savings. They also suggest using a gas station app to check on prices in your area. Consolidating multiple errands into each trip will save you time and money.

Shop Around for Auto Insurance

Whether you go with Flo, get down with the gekko, or choose another auto insurance company, be sure to comparison shop. It is easy to do and, surprisingly, prices can vary enough to put some extra dough in your pocket. Other auto expenses add up, too. When it comes to getting a car, figure out if it makes more sense to lease or buy a vehicle. Do you need a new car at all or can you get by on on older model. You may not pay for a car payment with a credit card, but the money you are spending is money you could otherwise use to pay down credit card debt.

Keep your car in good running order to reduce your repair costs and keep the resale or trade-in value high. Drive sensibly to keep your gas consumption down. All of these habits can up to big savings and smaller credit card bills.

Paris in the Springtime?

Online shopping and travel account for more than half of all credit card spending. Travel is clearly fun. I's also a luxury and should be approached as such. When you carry a credit card balance, it's best to put off exotic and expensive trips until you've eliminated or reduced your debt. Consider a staycation or day trips to places you can explore and enjoy at a far lower cost.

Put Down Your Phone

Online shopping takes the ease of credit card purchases and turbocharges it. It is intoxicatingly easy to click, click, click, and overspend. Set a rule that before you make an impulse purchase online, you will wait at least one day, and talk to your bff, mom, or partner, before running up debt. Websites and advertisements tell you how much you can save on the BIG SALE they are having, TODAY ONLY! The reality is that the items you don’t buy deliver the biggest savings.

Do You Need Another Pair of Shoes?

It is easy to overspend on clothing (especially when you would look so good in that new jacket!). Don’t buy more clothing than you can afford. Set a monthly budget based on sound accounting and only buy what you need. Host a clothing swap with friends to enrich your wardrobe without spending a dime, and have fun socializing. 

Housing and Home Improvement Spending

An astonishing number of people use credit cards to finance home improvements. This is rarely advisable unless you have no way to pay for an emergency repair, are about to sell your home and get the money to pay off the debt quickly, or about to get into the short-term rental business. Look at your options. See if you can find a lower interest rate using your home equity taking out a HELOC or a second mortgage.

These are just some of the many ways to curb spending, to free up money you can use to increase your credit card payments. Depending on your level of debt, spending cuts may not be enough. If you feel like you're on a hamster wheel of payments that never seem to get you any closer to paying your debts down, look at consolidating your debt. You can also consult with a debt counselor. One thing is certain: the sooner you release yourself from the shackles of credit card debt, the sooner you can start saving… and living in freedom.

Cutting Credit Card Spending Not Enough

If you can't solve your credit card debt problem by cutting your spending, look at other solutuons. The BIlls.com Debt Payoff Calculator is a free tool that helps you find the right debt solution, making a recommendation based on your goals, priorities, and the size of the monthly payment you can afford.

Kathleen Marie Johnson is a landscaper and freelance writer who enjoys doing handy projects around the house. She pays close attention to the costs of any project and staying on budget.

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