scorecardresearchHow to curb your credit card-fuelled spending extravagance? Here are 5 steps

How to curb your credit card-fuelled spending extravagance? Here are 5 steps

Updated: 17 Oct 2022, 09:17 AM IST
TL;DR.
You must stop overspending using your credit cards. Dependence on this card to make purchases will push you into a prolonged credit card debt that you will find it hard to be rid of.
Abstain from frequent credit card use.

Abstain from frequent credit card use.

Watch around for discounts and offers this Diwali season, and you will find both online and offline stores announcing sales on their products this festive season. Credit card offers are great, especially, with some banks and some fintech companies announcing some great cashback schemes on their cards.

While using credit cards surely helps to pay for something you may not be able to afford immediately, using them rampantly can push you into an everlasting cycle of credit card debt. This does not mean that you must never swipe your cards when needed. You must remember that these cards are important to building credit provided you are aware of the right way to use them.

Affordability matters

It may seem easy to pay using your credit cards. While it may relieve you from paying cash immediately, you have to repay the amount in time. This means that you are still liable to repay the amount from your earnings or savings. This can wreak havoc if you cannot afford to repay the amount. To avoid this, you must not spend what you cannot afford to pay back. To ensure this, set some boundaries for your spending behaviour. 

Check your savings account balance to check how much you have and anticipate how much more money you will have in the credit repayment period. To avoid wasting your money on debt repayment, you may resort to paying using a debit card so that you spend only what you can afford.

Avoid impulsive buying behaviour

Whoever told you that mindless buying is the quickest way to lean toward poverty was right. There is no excuse to buy things that you may not need but want only because others around you are buying them. It makes no sense to always aim for the latest electronic gadgets or wear branded clothes or get your hands on designer bags or clutches. 

Social media platforms are flooded with advertisements of brand new gizmos or may induce you to succumb to the latest fads. However, they do not tell you that these things come at a cost. Banks advertise the availability of credit without telling you that you have to repay the amount sooner or later. The high-interest rates on credit cards often cause many to pay twice the amount spent on cards. Such mindless expenditure can impede your financial goals or rather prolong your way to financial security.

Track your expenses

You surely know how much you earn, but are you aware of your daily expenditures? Unless you are a spendthrift who blows away the monthly salary in one go, try to maintain a record of how much you spend. It does not matter how and where you spend your money. Be it on clothes, dining, entertainment, travel or the most living expenses, remember to list down all those expenses. 

Then assess how much you spent using your credit cards and if at all those expenses were necessary. This will enable you to keep a track of your spending habits. This will also refrain you from spending unnecessarily as you will be able to visualize how much money has been wasted and how much more you could have just saved or invested toward a better future. 

Beware of falling for rewards

Rewards look good when they encourage you to do something well; not when they empty your wallet. Think of why the companies are offering those rewards. It is obviously to tempt you to spend your money. Not that spending your money is bad but feeling compelled to buy things only for rewards is equivalent to missing out on a possible investment opportunity or addition to your investment portfolio.

Avoid store credit cards

So many stores issue their exclusive credit cards and entice you to avail of one for exclusive discounts. One thing is that you can use these cards only at those stores and second, they come at very high-interest rates, which means that you lose out on your savings by paying interest on the cards. Thinking that you are able to save a lot takes a backseat as the high-interest rates on these cards negate any prospect of savings in the long run. Avoid the idea of taking a store credit card by not signing up for the card when you buy something from the store.

Credit cards have a bad reputation, especially, among those who find it hard to save their money. However, a lot depends on how you use these cards. Not that you must withhold yourself from having a credit card or using it when needed; just use it when you can repay within the stipulated period or for making urgent purchases only. 

Article
Should you pay minimum charges on credit cards?
First Published: 17 Oct 2022, 09:17 AM IST