Credit cards are a convenient and flexible way to make purchases. But they can also become a financial crutch that makes it easier to buy things in the short term, while creating serious debt problems in the long term. 

If keeping up with credit card balances has become a challenge, it’s time to assess your overall financial picture and your spending habits. Remember: taking on credit card debt is borrowing money you haven’t earned yet. 

If you frequently use a credit card, be aware of the common warning signs that might indicate issues with credit card usage: 

You find it challenging to set aside savings. 

If it is challenging to set aside savings on a consistent basis, review your monthly budget and look for ways to reduce spending to save a little from every paycheck. 

You are only able to make minimum payments on your credit card debt. 

Making only the minimum payment means you’ll end up paying much more in interest charges, and it will take you longer to pay your debt off.

Your credit cards are near or over your credit limit. 

Your creditors set your limit based on your credit history, income and outstanding debt. If you are at or near this limit, take a good look at your financial picture and focus on making smart purchase decisions in the future. A good rule of thumb is to try to keep your balances below 50% of your available credit limits.

You are taking cash advances from cards to pay your other bills.

Credit card cash advances offer quick funds, but be sure to understand the interest rate you will pay on that money (it will be listed in your credit card agreement). Using cash advances in this way is like digging one hole to fill in another hole – usually the hole just gets deeper and deeper! 

 

 

A Smarter Approach to Credit 

Smart use of credit cards is part of financial wellness. Managing credit is possible with planning and the understanding of how credit can affect your financial future. It’s all about the basics: looking at monthly expenses, looking at income and setting spending priorities as well as building up emergency savings. These principles will continue to be the building blocks of achieving financial success!