Four Reasons Why It's Hard to Avoid Credit Card Use
One of my financial goals for the year was to pay off my credit cards and then stop using them completely. Paying down the credit card debt was accomplished by cutting costs and diverting that extra money towards debt reduction. Staying out of credit card debt, at least for me, has been much more difficult.
Four reasons why it's hard to stay out of credit card debt & strategies for staying debt free
1. Unexpected expenses are the main reasons so many of us keep grabbing for the credit card. Auto breakdowns, unexpected medical bills, emergency home repairs, and underestimated tax debt are just a few of the unexpected emergencies that we tend to finance using our credit cards.
Breaking the cycle of charging emergencies begins with building up an emergency savings to use instead of a credit card. How much of emergency fund do I need? has tips to get you started.
Cardholder discounts. Many merchants gear their sales and auto payment plans towards credit card holders. Macy's, for example, regularly offers a 15% discount to shoppers who put their purchases on their credit cards. Cell phone providers like Cricket charge a $3 a month surcharge to cash customers but waive the fee if it's automatically charged to your credit card.
To earn the discount while avoiding debt, use your charge card for the purchase and then immediately pay off the balance at the customer service counter.
3. Incentives.With so many credit card companies offering 1-5% rebates on our purchases or other incentives, it's hard to resist charging to "earn" those rewards and bonus miles.
It's important to remember that you aren't "earning" anything if you end up paying interest on the debt. With monthly interest rates anywhere from 1-3%, it's best not to use a card unless you have the money to pay it off completely before the first billing cycle.
4. Security also drives us to use a credit card instead of our checking accounts or debit card; especially when shopping online. If it's your debit card number that's stolen, you are responsible for the first $500 of loss. Credit cards are limited to the first $50 of loss.
For online or telephone purchases, it's safer to use your credit card as long as you can discipline yourself to pay the bill immediately when it arrives in the mail.
There's nothing wrong with using credit cards to save money and earn rewards. Paying off the entire balance before the end of the first billing cycle is the magic formula for earning discounts & rewards while also remaining debt free.
More by this contributor:
Ten Ways to Cut Food Expenses and Increase Your Savings.
How to save money easily without changing your lifestyle.
Consumer tips for avoiding credit card fees.
Four reasons why it's hard to stay out of credit card debt & strategies for staying debt free
1. Unexpected expenses are the main reasons so many of us keep grabbing for the credit card. Auto breakdowns, unexpected medical bills, emergency home repairs, and underestimated tax debt are just a few of the unexpected emergencies that we tend to finance using our credit cards.
Breaking the cycle of charging emergencies begins with building up an emergency savings to use instead of a credit card. How much of emergency fund do I need? has tips to get you started.
Cardholder discounts. Many merchants gear their sales and auto payment plans towards credit card holders. Macy's, for example, regularly offers a 15% discount to shoppers who put their purchases on their credit cards. Cell phone providers like Cricket charge a $3 a month surcharge to cash customers but waive the fee if it's automatically charged to your credit card.
To earn the discount while avoiding debt, use your charge card for the purchase and then immediately pay off the balance at the customer service counter.
3. Incentives.With so many credit card companies offering 1-5% rebates on our purchases or other incentives, it's hard to resist charging to "earn" those rewards and bonus miles.
It's important to remember that you aren't "earning" anything if you end up paying interest on the debt. With monthly interest rates anywhere from 1-3%, it's best not to use a card unless you have the money to pay it off completely before the first billing cycle.
4. Security also drives us to use a credit card instead of our checking accounts or debit card; especially when shopping online. If it's your debit card number that's stolen, you are responsible for the first $500 of loss. Credit cards are limited to the first $50 of loss.
For online or telephone purchases, it's safer to use your credit card as long as you can discipline yourself to pay the bill immediately when it arrives in the mail.
There's nothing wrong with using credit cards to save money and earn rewards. Paying off the entire balance before the end of the first billing cycle is the magic formula for earning discounts & rewards while also remaining debt free.
More by this contributor:
Ten Ways to Cut Food Expenses and Increase Your Savings.
How to save money easily without changing your lifestyle.
Consumer tips for avoiding credit card fees.
Published by C. Jeanne Heida - Featured Contributor in Business & Finance
Jeanne is a small business owner with 25 years experience in the real estate industry. A consistent Y!CN Top 100 writer, her articles can be found at Y!Finance, Shine, Your Wisdom, DEX, and the Scripps Net... View profile
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6 Comments
Post a CommentYes managing credit cards does take discipline, but sometimes just cannot be avoided.
The hardest thing for me is when stores offer you 15% off on what you're buying if you open one of their credit cards!
Many things changed on security since I last had a credit card, thank you for the post!
Jeanne, excellent advice! I wanted to tell you that I may not be around much for the next few days. We've had a bit of a family crisis here. It feels like a "tornado" ripped thru our lives in NY. My disabled cousin (and friend) who we visit often, died suddenly of heart failure yesterday. I'm trying to help w/ her arrangements & her dogs. cheers
Thanks for the insight. As for on-line safety when shopping...2 words: Pay Pal. Best thing since sliced bread!
Excellent! I've actually gotten into verbal altercations with more than one Kohl's clerk. They just won't take no for an answer. I even wrote the corporate HQ telling them they should stop pushing credit cards on people. I did get a response, but they take no responsibility for their actions.