It is all too easy to whip out your credit card when you want to purchase something, and you know you don’t have the cash to pay for it. While there are times that you may need to cover expenses on credit, such as emergency- or unforeseen expenses, it shouldn’t be a habit to buy on credit, as this can be a slippery slope leading to a never-ending debt cycle.
First National Bank (FNB) notes that if you are constantly swiping your credit card, yet dread checking your statement at the end of each month to see how much you owe, you are most likely misusing the credit.
According to Jonathan de Beer, former head of collections at FNB Credit Card, a credit card can be convenient and rewarding if you require safe and instant access to cash. However, it's important to be careful with your spending, as you could otherwise find yourself in a financial predicament.
De Beer notes the following five signs that can indicate you are misusing your credit card.
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1. You feel guilty after spending
If you feel guilty after using your credit card, you need to look at your spending behaviour. A feeling of guilt could indicate that you are either buying something you don’t need, you are spending without checking your budget, or you know you shouldn’t be making a purchase but you are doing it anyway.
2. You can’t afford to pay extra into your credit card each month
It's advisable to pay more than the minimum monthly repayment on your credit card. If you reach a point where you can't afford to repay more than the minimum amount, you may be heading down a slippery slope. You need to monitor your spending carefully if you have encountered this challenge.
3. Your credit card statement comes as a shock
If you are surprised when you receive your credit card statement at the end of the month, you may need to implement a better budgeting- and debt-management system. A vital part of this is keeping up to date with your spending.
4. You use a credit card to pay another credit card
If you have multiple credit cards and use them to settle your debt or pay off other credit cards, you could end up facing serious financial difficulties. This spending behaviour should be avoided at all costs.
5. You aren’t saving because of your debt
Saving is important, not only for your future, but also for larger expenses such as buying a home or your child’s education. Being financially overstretched to the extent that you are living off credit can see you face a number of financial challenges, particularly when an emergency arises.
De Beer notes, however, that facing one or all of the above does not mean that you will always have financial troubles. “If you notice any of these signs or find yourself excessively spending beyond your means, it's not the end of the road,” he says. “There are important measures you can take to turn your situation around.”
Managing your debt is one of the first things you can do. Draw up an accurate list of all your debt and spending; from this, determine a budget, and stick to it. To help reduce your credit card debt, try to pay a little extra towards your debt each month.
If you are struggling with your debt and cannot afford your debt repayments, debt consolidation might be the right solution for you.