Ah, credit. It’s been the backbone of the financial industries for years. Banks rely on us to get mortgages, as this means that they can recoup the interest. Banks rely on us for personal and secured loans. They rely on us for business loans and car loans – credit cards are just another stream of debt that banks and lenders rely on us for. If we take money out from the bank, then the fees and interest we have to pay is going in the pocket of the bank. But the thing is, credit card offers look so tempting!
Of course, they are designed that way. The more we spend, the more money we pay in interest and the circle continues. Credit cards and lines of credit are readily available, and we are living in a world of instant gratification.
Why would you save up for that dream vacation when you slap the cost on your credit card and pay it off later? And that’s how credit card companies entice customers to use them. The problem is that when you go for instant gratification instead of patience, you find it much easier to understand why we have become a world of debtors.
Getting back on track with your debt and moving from the red back into the black doesn’t have to be a hard road but the first place to start is understanding. You need to understand which of your purchases got you into debt and why you used credit in the first place.
You also need to learn more about credit card debt from Leinart Law so that you are making the right decisions with how to get back out of debt again. Leinart Law can help you to get started with getting back out of debt, but in the meantime, we’ve got a few ways you can talk yourself out of using credit in the first place. You don’t need to succumb to the offers from credit card companies – and here’s how you avoid it.
Cash Helps You To Budget
When you can see cash leaving your hand, you are better able to question your purchasing decisions. You don’t want to lose any money and you are always more likely to question your purchase if you can see your money change hands. Using cash for purchases allows you to save better, too, as you are more unlikely to want to hand over fistfuls of it in favor of a brand-spanking new car!
So, use cash where you can and not your regular bank card – certainly not the credit card – and you can see how your money is being spent.
You Don’t Learn Self-Control
A credit card is a nice way to buy what you want as you want it, but if you live by the rule that your credit is always available, you’re never going to be able to learn how to control your buying. Credit offers that instant happiness – but then you have a debt saddled to you every month with interest on top.
It’s not worth the hit to your self-esteem when you then cannot afford other things, and use the credit card again and again to stay above water. This can have a severely detrimental effect in all areas of your life and you can bet that substance abuse and depression can easily follow!
Credit Can Make You Forget Your Budget
Uttering the words, “don’t worry I’ll use the card” can become ever too familiar. When you keep turning to credit for everything, you can easily forget that you have a budget to which you were trying to keep to. Budgeting can help you to keep your spending in control, but if you are turning to credit too often, you’re going to watch it quickly spiral out of the control you’ve carefully built!
The biggest thing that you can do every month is to plan your expenses and make sure that you budget lines up properly. Write everything down and budget so that you can see what you are earning and what you are spending. The remaining balance you have each month is what you can spend, and the worst thing that you can do is to spend all of that disposable income on debt with credit cards weighing you down.
Why Pay Interest?
Interest is the money you pay on top of paying off the money you spent. If you buy something for $100 and the interest is 20%, you’ll repay $120 and you may not have that money spare. Interest can be expensive and you shouldn’t have to pay out for that if you don’t want to.
The best way to avoid paying interest is to avoid credit in general! The worst thing is that if you miss a payment, or any of your balance is unpaid, the interest rates rise. Before you know it, you’ll have an even bigger debt to consider because of the rise in interest rates, and you won’t be able to take out more credit, either!
A Poor Credit Score Isn’t Worth It
You may want to buy a house one day and not realise that your credit score can badly impact it. If your credit card goes unpaid more than once, you are in default and this can lead to a poor credit score. You need to ensure that you can pay your bills as much as possible and not skip any payments.
However, if you cannot make a payment you can negotiate it with your creditor. If you don’t take out a credit card, your credit score won’t become poor with missed payments. Your credit score can be as important with some employers as it is with getting a mortgage. It’s just not worth it for a hot week away on a whim.
Credit Cards Can Lead To Bad Habits
Your relationships need to be intact as much as possible, and too much use of credit cards can lead to risking those relationships. Couples and friends can fight about money and that’s not unusual, but when it’s because of bad habits with borrowing money, relationships can fracture irreparably. When you spend too often on a credit card, you are opening a world of risk with your financial future as much as your relationships.
The More You Borrow, The More You Spend
It’s such a temptation to have a line of credit. It’s not your money, but you’re allowed to spend it as you want to and many people spend more and more by buying the things that they don’t even need when they use a credit card and not cash.
This level of debt can be easily out of control and yet because spending money feels good, we keep doing it. It feels good to buy things, but it feels better not to go into debt by the end of your spending. Saving is better as an option, and you can then buy whatever you want outright without owing anyone afterward. It can feel far better to pay for things you want with cash than pay on credit. You know that you own something without owing something, and it will make a difference.
Credit Card Use Can Lead To Bankruptcy
Tons of spending is lovely – if you have the money – but if you don’t, you end up owing so much that you can’t pay for anything, bankruptcy is the option looming in front of you. You can speak to lawyers about credit card debt, but the best thing to do is to avoid getting into hopeless amounts of debt in the first place.
Of course, once you’re there, there’s not much you can do but try to turn yourself around. Speaking to the right people will help you and declaring bankruptcy is not the ideal course of action. You can end up with a poor credit history for a whole decade if you don’t pay attention to your credit and your owed payments early enough. You have to take the time to build your credit all over again – and that isn’t easy.
There’s No Peace Of Mind
Debt doesn’t provide you with any peace of mind. You’re always looking for letters and missed calls, late fees, interest demands and more. You also have to prioritise your debt over other payments if you dig yourself a hole. The best way to treat yourself is with saving your money and paying for what you want without relying on credit. Don’t get yourself into debt for something nice.
When it comes down to it, credit works very well when the balances are paid off every month, but it doesn’t work as a long-term solution. Debt happens to all of us but it’s always a better idea to avoid it where you can. Debts such as student loans and mortgages are often preferred to credit card debt, but you can find yourself refusing the credit card offers and feel good for it. If your credit cards are not managed properly, you will find that you are chased by creditors and that can be very stressful. It may look like a great offer, but it’s not the best offer you could get!