Finance Globe

U.S. financial and economic topics from several finance writers.
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Four Examples of Reckless Credit Card Spending

Using a credit card isn’t hard. Swipe your credit card at the cash register, walk away with your merchandise, and wait for the credit card issuer to tell you how much you owe. Making credit card purchases can feel great because you don’t have to give up your hard-earned cash, but your spending can get out of control if you don’t pay attention to your credit card purchases. Here are some examples of reckless credit card spending.

Going on a spending spree. Swipe, swipe, swipe, goes your credit card as you go from store to store, shopping to your heart’s content. You might expect your credit card to stop working once you when you’ve reached your credit limit, but that only happens if you’ve expressly opted-out of over-the-limit transactions. Otherwise, your credit card issuer may continue to approve purchases hundreds of dollars beyond your credit limit.

The problem with a spending spree: you have to pay it all back. And since your minimum credit card payment is a percentage of your credit card balance, your post-spree monthly payment may be steeper than you can handle.

Avoid spending sprees. Instead, shop with a specific amount in mind, ideally an amount considerably less than your credit limit, and stop swiping once you reach that limit.

Maxing out your credit card. Here’s a good rule to follow: never max out your credit card. There may be one exception to this rule: you’re making a large purchase that you plan to pay off immediately with money that’s already in your bank account. Otherwise, maxing out your credit card will put an uncomfortable strain on your finances.

Applying for another credit card while one is maxed out. The only way to solve credit card debt problems is to pay off that debt with cash. Getting another credit card before you’ve paid off your previous credit card debt is asking for trouble. Now, instead of paying one credit card balance, you’ll have to focus on paying two credit cards.

An exception to this rule: you’re applying for a credit card to transfer your previous balance to. Transferring balances from a high interest rate credit card to a lower interest rate card can make it easier to pay off your balance. But, you still need to pay off your balance before creating a new one. Don’t transfer the balance only to run up the credit card balance again.

Loaning your card to someone not trustworthy or good with money. If you’re going to be responsible for a financial mess, it should at least be one of your own doing. When you let someone else use your credit card, especially someone who’s not necessarily a responsible spender, you’re on the hook for whatever purchases that person makes on your account. They may break all the reckless spending rules you’ve been working hard to follow. Keep your credit card to yourself.

Reckless credit card spending will undoubtedly lead to problems with debt and credit card payments. If you can’t pay for it with cash, you can’t afford to pay for it with credit. Keep this rule in mind and you’ll have far fewer problems with credit card spending.
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Monday, 14 October 2019

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