Although it is a general rule not to treat credit cards as cash that’s entitled to you, there are still others who somehow manage to screw up and accumulate debt, swiping their cards as if it’s their own cash and as if they would never have to re-pay to the credit card companies they’re indebted to. And when there’s unpaid debt you’re having a hard time re-paying, that’s when things start to get ugly. That’s when collectors try to scare the living hell out of you, accompanied by all those sleepless nights, not knowing where you’ll get the money to repay your debt. That’s when people struggle towards the next payday, hoping to repay their debts. As they say, the struggle is real.
What are the common reasons behind this phenomenon of people who land in extreme debt? I’ve talked to people who’ve been on the same boat before, asking about the deadly sins a credit card holder can make. And with the goal of sharing to you the reasons why they landed in debt, we hope to learn something from their all-too-common experiences and avoid having to repeat the same mistakes.
The Seven Deadly Sins of a Credit Card Holder
- Minimum payment – You can survive just through payment of the minimum, which is just a measly amount compared to your total balance. And because of this, it is easy to get too complacent and forget all about your growing debt and interests ’til it’s too huge to ignore.
- Credit card promotions – Getting a brand new credit card aside from your current just to take advantage of that sweet (and free) vacation that comes with it, or pushing through with that big ticket installment purchase just because you’ll get a free something something is an irresistible but terrifyingly dangerous move. That new credit card means more purchasing power for you, and that big ticket installment purchase, well, you have to make sure you have the monthly ‘extra’ income to cover it (then in that case it would make sense to take advantage of the promo).
- Forgetting your monthly bill – It’s so simple, but it is so easy to forget something unpleasant like your monthly bill. This is the same with failing to enroll with your bank to send your monthly statement through email, or failing to update your address when moving out. Aside from your debt accumulating interest, another sad thing is that you would also have to pay ‘late payment’ fees.
- Vacations, clothing, electronics, and other luxuries that you cannot really afford – Absorbing in the “buy now, pay later" mindset makes you increasingly vulnerable to debt. Now that credit card companies are making it more and more easier and convenient to use your plastic money, it’s easier than ever to make that purchase and swipe that card. The question is, do you have the actual cash equivalent? Or are you impulse buying, without any actual money in your savings?
- Allowing credit card companies to increase your credit credit limit – Credit card companies sometimes ‘reward’ you for your patronage by increasing your credit limit – something that makes you feel entitled. And when you feel entitled, that’s when you spend more. Add in the good feeling that your spending power has just increased – tempting, isn’t it? Also, for those who don’t keep tab, you won’t notice that you maxed out on your previous limit. You’ll only find it out once you max out on your new credit limit.
- Not keeping tabs of the bills – This is especially important. Same as with managing your cash, it’s more true with credit cards where it’s really easy to go overboad your spending when you don’t keep tabs of your spending. Not monitoring your spending makes it one of the most deadly sins of a credit card holder.
- Not having an emergency fund – If you don’t have an emergency fund sitting in your savings account (or under your bed or whatever), you’re more likely to swipe that card when an emergency situation calls for it. And most of the time, an emergency situations are expensive. If you do not have an emergency fund, one of the easiest way out is to swipe that card.
Credit cards are not free money – they are loans you still have to pay for.
I hope you’ve learned something from the 7 deadly sins mentioned above. These are actual sins committed by previous ‘sinners’, and they’re sharing them with us anonymously in the hopes of allowing others to learn from their mistakes. Hopefully you’ll be aware, and if you think you may be committing any of the above, use these to help you re-evaluate your current situation.
Having a credit card is not completely a bad thing. It’s actually a necessity nowadays and it makes everything even more convenient (imagine the old days of having to go to the airline office in another town just to book a ticket). Smart and responsible management of our credit cards is the goal here, so we can avoid a painstaking debt cycle. In the end, credit cards are not free money – they are loans you still have to pay for.
Also from FrustratedBillionaire:
- How can some credit card holders sleep peacefully at night?
- Top New Year’s resolution: Live a debt free life (5 guaranteed tips!)
- Avoid annual fees with these credit cards
Do you have another ‘sin’ to add to our list? Feel free to comment, share your tips, or ask your question in the comment box below. Please also like us on Facebook and Twitter! Thanks!