Credit card overspending is one habit you need to take a deliberate effort to break as it can ruin your budget and your credit score. Overspending is actually easy and it happens without planning. Sometimes, it feels like no harm has been done until you find yourself struggling with debts. If you indulge in credit card overspending, chances are that you will start to default in payment. Here are ways you can avoid credit card overspending.
Don’t Forget That You Have to Pay It Back | How To Avoid Credit Card Overspending
If you always keep it at the back of your mind that a credit card is different from a debit card; you will remember that you have to pay it back. Credit expenses are like borrowing money and you will pay with additional fees.
According to a study conducted in 2001 by Drazen Prelec and Duncan Simester of MIT’s Sloan School of Management, participants were willing to pay more for purchase, specifically tickets to a basketball game, when they used credit cards over cash. This may be because you don’t feel like you’re actually overspending since you’re not paying directly from your purse.
Avoid thinking of your credit card as free money, remembering that you’ll have to repay whatever you purchase. Hold yourself accountable for what you spend on your credit card, spending as if you were actually using cash.
Consider Your Current Balance Not Your Credit Limit | How To Avoid Credit Card Overspending
While more available credit expands your purchasing power, having a big credit limit isn’t the same as having a lot of money in the bank. Don’t base your spending on your credit limit. You don’t have to use all your available credit just because it’s there. Using too much credit can negatively affect your credit score.
Since paying your balance in full is the best way to avoid getting into too much debt, let your current balance influence how much you spend. Set your own personal credit card spending limit spend based on your income and other expenses. Not only on your credit limit. You can ask your credit card issuer to lower your credit limit if that will help you keep your credit card spending in check.
Be Cautious Juggling Multiple Credit Cards
Generally speaking, the more credit cards you have, the easier it is to overspend. Multiple credit cards increase the amount of credit available to you and more opportunities for spending. Multiple credit cards also mean you have to manage your balances among all the credit cards and take more caution with keeping your combined balances within your personal spending limit.
It’s hard to say how many credit cards are too many, but for a lot of people, one credit card is enough. When you’re tempted to open a new credit card. Consider why you’re interested. Is it to get additional perks, to better manage your finances. Or are you looking for ways to spend more money?
Use Your Credit Card Only for Things You Would Have Purchased Anyway
This rule is counterintuitive for many credit card users. People tend to think that credit cards are for purchasing things they can’t afford. This is one of the reasons so many people are in debt over their heads — they’ve used credit cards to artificially extend their purchasing power. Use your credit card for purchases you would have made anyway, not for things that you ordinarily would not buy because you could not afford them.
Let Your Financial Goals Guide Your Spending Decisions
Credit card overspending will almost always hinder you from your financial goals. The impact may not be directly or immediately recognizable, but too much overspending will definitely affect your progress towards your goals of paying off debt, building up savings, or retiring early. As you face spending decisions, consider whether your choices will help you reach your financial goals.
Leave Your Cards at Home | How To Avoid Credit Card Overspending
If your credit card is not always handy in your wallet, you won’t be tempted to overspend. No credit card, no spending, right? If you’re easily tempted by retailers’ juicy offers or you lack the personal discipline not to overspend, it’s better not to always carry your card with you. Carry your credit card only when you’re shopping for a specific purpose — buying groceries (with a list) or purchasing a new appliance. Otherwise, you risk using your credit card to fund unplanned purchases.
If you’re prone to credit card overspending, you have to take control of the situation. Put your credit cards away until you could more be disciplined with your spending. This is the best thing to do to protect your credit and your finances period forcing yourself to use only cash and debit cards will help you avoid the problems that come from overspending with credit.