It is all too easy to whip out the credit card when you want to purchase something, but know you don’t have the cash to pay for it. While there are times when 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) noted 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 your credit card.
According to Jonathan de Beer, the 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 is important to be careful with your spending, as you could otherwise find yourself in an unnecessary and otherwise avoidable financial predicament.
De Beer offered five signs that can indicate you are misusing your credit card. These are:
- You feel guilty after spending:
If you feel guilty after using your credit card, clearly you need to look at your spending behaviour. This feeling of guilt could indicate, according to de Beer, 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.
- You can’t afford to pay extra into your credit card each month:
It is often advised that you pay more than the minimum monthly repayment on your credit card. If you reach a point where you cannot afford to repay more than the minimum amount, you may be heading down a slippery slope. De Beer noted that you could need to monitor your spending carefully if you encountered this challenge.
- 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 and see how much you owe, you could need to implement a better budgeting and debt management system to your finances. A vital part of this is keeping up to date with your spending.
- 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. De Beer stressed that this spending behaviour should be avoided at all costs.
- You aren’t saving because of your debt:
Saving is important, not only for your future, but for larger expenses such as buying a home or even your child’s education. Being financially overstretched to the extent that you are living off credit and unable to save can see you face a number of financial challenges, particularly when an emergency arises.
However, facing one or all of the above does not mean that you will always face financial troubles. De Beer noted: “If you notice any of these signs or find yourself excessively spending beyond your means, it is not the end of the road, as there are important measures you can immediately take to gradually turn your situation around.”
Managing your debt is one of the first things you can do. To do this, draw up an accurate list of all your debt and your spending, and 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.
Handy tip: If you are struggling with your debt and unable to afford your debt repayments, debt counselling might be the right solution for you.