Are you bogged down by credit card debts leading to undue stress and anxiety? Do you wish you had put a leash on your spending habits way before?
Well, you are not alone.
According to a research study by The Federal Reserve Bank of New York, American households reported around $26 billion towards credit card debt; way higher compared to the last leg of 2018. As a matter of fact, almost 55 percent of American adults are in moderate to massive debt. Reportedly, another 22 percent claims how their average savings rests anywhere between $100 and $500.
Furthermore, only one out of ten individuals reported their balance to be just over $5000, which makes it a pretty mundane situation. While taking a loan for things like university needs to continue education is arguably a worthy investment, a majority of credit card debt comes from spending on things that you don’t actually need in the first place.
Now, the common-sense solution to this issue is that one should stop spending.
Reality check: Damn thing doesn’t work.
Thanks to the power of billions of dollars, backing up marketing consumerism, credit card spending is nothing more than just another bad habit. Gladly, there are still a few ways you can take control of your card spending to reshape your finances. Here are five such proven ways to get you started.
Using reward points
It’s always advised that you pick from most recommended cards, where you can avail benefit from reward points system. Quite often, many credit card providers offer promo periods where spending across a particular category like transportation or restaurants allows one to double the number of reward points earned. Now, on reaching a certain threshold, you might as well redeem your earned points towards gift cards or buy stuff from the reward catalog of the company.
The trick lay in finding a card that suits your spending behavior. Not doing so is utterly foolish and usually puts one in debt. If you have already been spending over a particular hotel or a preferred airline using any credit card, it’s probably good to keep using the same to usher discounts on account of your continued patronage.
Consolidation helps in the long run
Let’s start with an easy formula to win the battle against debt. Majority of credit card issuing companies allow balance transfers which consolidates all your debt into one single account.
How does this benefit you?
Consolidation of your credit card debt means you will have to focus on paying off just one single bill each month, instead of addressing multiple payment schedules. In other words, no missing on due dates, no late fees to pay. Alternately, consolidation shall also put you on track with how much you owe to plan your savings & expenses better.
The 10 percent habit
While it’s seemingly impossible to put a check on your daily expenses, your mounting debt can lead to a disastrous scenario, unless you inculcate a new habit. The 10 percent habit is a full proof formula to save in order to spend later. All you need to do is to take 10 percent of your earnings each month and put it in a separate account and forget about it. Even better, put a standing instruction if you have to.
Why do I need to put money into a separate account?
The 10 percent account and whatever accumulates in it shall act as a contingency plan in case you meet any unseen incidents along the way, where your earning gets affected. It will seem odd to you when you are just starting out. Relax! In a few months, you will feel wonderful to see money growing around you, and you will never panic or freak out, no matter what the ill or the odds are.
Ask your bank to bring down your credit limit
Here’s a small hack to put brakes on over-spending your credit card. However, this applies more when you have almost paid off all your debt or a few steps away from it. Once you bring yourself to pay away all your debt, it’s natural that you will gain more confidence. Now, this is a tricky situation where things can go astray, and you can fall back to your spending loop.
So, what should you do?
Pick up the phone and get on a call with your bank, and request them to lower your card limit. They might be a little reluctant at the beginning, but ensure that you have been their customer for long and that you wish to be more responsible towards your spending behaviour. That usually gets the job done. However, if they are reluctant enough, put down a written request to the manager stating your situation and that you are considering “cancellation of your credit card” if your request is not entertained.
P.S-Never close your credit card unless you are really confident about handling your expenses right.
Maintain a journal to record your spending
Besides putting a check on your spending behaviour, it is also necessary that you seek to create awareness about the same for yourself.
A good way to do this is to maintain a spending journal. Every time you pop out your credit card for a purchase, make a detailed entry.
Did you spend way too much on grocery or deli items? Did you order for a few extra drinks last Friday? Did you end up buying a trench coat that you probably wouldn’t wear later? Such questions can be readily answered by taking a look at the journal.
Several such recordings that go into the pages will help you determine your spending behaviour and accordingly help set savings goals.
Wipe away saved credit card info from shopping sites
While technology gives you freedom from remembering your card information, such benefits can be detrimental for your spending portfolio.
When trying to control your credit card spending, you must reverse the game. Delete all saved credit card information from your favourite online shopping sites. Do the same in your phone app too and stay logged off for good.
Such measures will make it harder for yourself to get a hold of your credit card info which in turn shall render you more conscious towards your spending habits.
Remember, having a credit card is never a bad thing. However, failing to control your spending behaviour leading to debt is definitely a problem. If you are not good at handling money, you should always try to use a credit card to pay off unavoidable payments like utility bills only. Only then, you shall be able to take proper control of your credit card spending and gain edge on your finances.