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With most things in life, identifying a problem gets you a lot closer to its
solution. Credit card debt is no exception. The sooner you recognise that you
have a problem, the sooner you should be able to implement some strategies to
address it.
Due to the overwhelming convenience of credit cards, we often find ourselves
almost addicted to using them daily without realising that we are digging
ourselves further and further into debt.
Balancing Credit & Savings
There are some clear signs to watch out for that will confirm what you may
already suspect - your credit card debt is out of control, and it is time to
pull the reins in on your credit spending.
You miss some of your set credit card payments.
Irregular repayment of due debts can be a clear sign of someone experiencing
debt stress. Perhaps you find yourself making large lump sum repayments one
month (when you have the cash to do so) while other months you skip a repayment
completely.
Your credit card balance appears to be in arrears - with set interest not
covered.
If you are having cash flow difficulties leaving some debts unpaid every other
month, you are probably carrying too much debt and need to restructure your
finances before you completely lose control and need to consider bankruptcy.
You are using your credit card for everyday essentials such as milk & bread
Unless you are one of these people who would like to squeeze every last drop in
rewards and bonus points out of your credit card, you are unlikely to
intentionally make everyday essential purchases on credit. While most of us will
use the plastic when shopping in the supermarket, we generally use cash to buy a
litre of milk at the local convenience store.
When you use credit cards to make a purchase, you do not generally feel the same
loss of money as you do when you pay for your purchases in cash. The purchasing
experience on plastic is seamless and does not feel as if you are spending money
at all. It was purposefully designed to be so in order to pull those unaware
more and more into debt.
Your credit card balance is increasing every month
If the balance of your credit cards is growing faster than your savings, you are
on a way to debt disaster and must STOP.
Spending money today in anticipation that your next pay cheque will clear the debt
is a dangerous approach. People who take this attitude find that they have no
money this month to even cover the bare necessities because they have already
spent this month's wages on last month's expenses.
You have no savings left - all income is applied to debt repayment
In the past everyone who was working was putting money aside for a rainy day.
Most people had a savings account. However, the problem with using credit cards
is that we borrow money from tomorrow to pay for something today. Consequently,
many Australians have next to nothing in their savings and put every available
dollar on credit card debt repayment.
If you find yourself without a savings account or a savings account that has
been shrinking each and every month, it could be another sign of credit card
stress taking over.
Cash withdrawal from credit card
We all understand that withdrawing cash from our credit card is very costly and
is best avoided unless there is simply no choice. Anyone who is starting to use
their credit card in place of a savings account is certainly heading fast
towards a debt disaster.
The interest rates on cash advances are usually extraordinarily high and can, in
their own right, cause severe credit card stress.
Cash advances on credit cards should always be your last resort. If you are
finding that you need to supplement your income with weekly or monthly cash
withdrawals from your card, you are in financial stress and need to take urgent
action.
This article is provided courtesy of Honey Loans.
Disclaimer:
No financial advice provided to you.
This web site is not designed for the purpose of providing personal financial
or investment advice. Information provided does not take into account your
particular investment objectives, financial situation or investment needs.
You should assess whether the information on this web site is appropriate to
your particular investment/financial objectives, financial situation and investment needs.
You should do this before making an investment/financial decision on the basis of the
information on this web site. You can either make this assessment yourself or
seek the assistance of any adviser.
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