We love to use them because we can buy things now and pay later. And there’s nothing wrong with this—but only till things don’t go out of control.
If they do, it might mean you are addicted to your credit card—and that’s trouble with a capital T.
Here are some indicators of addiction to credit cards to help you know your relationship with plastic money.
- Reporting high credit card utilization almost every month
Credit card can prove to be a lifesaver when up against a financial emergency. It not only helps you ride through a financial emergency without much difficulty but also obviates the need of asking others for help. Therefore, using the credit limit to the hilt once in a while is ok.
However, a maxed out credit card month after month or getting “your card has been declined because of lack of funds” message far too often when you swipe it is enough cause to worry.
Take stock of your finances immediately. Check how you are spending money and what, plus whether you are buying impulsively or not.
Besides indicating a big problem in managing finances, high credit card utilization reflects poorly on your CIBIL report and pulls your CIBIL score down.
- Applying for one card after another
One credit card is not enough, so what do you do? You apply for another. But after some time you find even two is not enough. You need more credit limit.
Now what? You get another one, and a few months later one more, and then another.
However, no matter how many credit cards you take, the problem remains the same—the available credit is simply just not enough.
Don’t you think you’re approaching the problem from the wrong direction? What you need is not more credit but better management of finances.
Another thing to consider is maxing out multiple cards will quickly lead to a point where you’d be defaulting on some of your payments. Default payment affects your credit report severely and stays in it for seven long years.
Once your report shows you as a defaulter, no lender will ever, or at least for a very long time, offer you a loan. So, besides building more and more debt, you’d also make yourself ineligible for loan in future.
- Less or no savings
If all of your income is spent by the last day of the month, it is a worrying sign, because it means you are not saving anything.
If your incomes gets used up before the last day of the month, it’s even a bigger worrying sign, because it means either you are borrowing money or eating into your savings to pay for some of your monthly expenditure.
Using your savings to pay your regular bills is akin to double jeopardy. You’re, on the one hand, completely exhausting whatever you are earning and not keeping anything aside for future and, on the other hand, slowly eating away what you’ve saved till date.
Borrowing money is equally dangerous. It could put you in an awkward position in front of your friends and relatives if you repeatedly approach them for financial help.
It could also make you take a credit card loan or pure personal loan to get out of the current mess. Such a step, although provides temporary relief, would compound your financial problems further, because a personal loan comes with high interest rate and heavy penalties.
- Hiding your bills
Being secretive about your credit card bills is unhealthy, so is a strong aversion to discussing your spending habits with your spouse or close friends.
- Paying only the minimum amount
If you pay only the minimum amount almost every month because of lack of availability of funds, it is not a healthy pattern. While for now you might be able to push away trouble, but soon the whole thing would blow up and you’d have to deal with it.
Addiction to credit cards can inflict severe financial damage and sully your credit report for several years. That’s why it is necessary that you take remedial actions if you believe you are, or worse have been for some time now, exhibiting one or more of the aforementioned behaviors.