Like many things in life, spotting a problem before it begins is far better than trying to fix an issue after the event.
This applies to all things financial, particularly credit cards. Due to the overwhelming convenience of these little plastic critters, we often find ourselves becoming accustomed to using them on a daily basis.
So how do we know when our daily credit card usage starts to spiral out of control? How do we spot the signs of stress when it comes to credit?
Here are the five most common signs you are heading into troubled waters with your credit card.
You find yourself paying lump sums, but missing regular repayments
Often a tell-tale sign of credit card stress is when people make irregular payments. This might mean you make large lump sum repayments one month (when you have the cash to do so) while other months you skip a repayment completely.
If you are unable to meet the regular repayment requirements (and it is highly suggested you go above and beyond these minimums) you are potentially having issues with your cash flow that would indicate your credit card limit is too high.
You are using your credit card increasingly for bare essentials
Ignoring people who use credit cards for reward points, if you find yourself purchasing staples and everyday items on your credit card such as milk, bread and other groceries – you are once again showing signs of credit card stress.
While some people use this method to balance their cash flow, others often turn to credit as a ‘once off’ and unknowingly become hooked to using credit due to poor cash management. Remember, that even a $10 purchases at the local supermarket can start to add up when done on a daily or regular basis.
Your balance is rising faster than your income
If your credit debt is rising faster than the amount you get paid per fortnight or month, it indicates that you are entering credit card stress.
Some people will spend up to their salary on their credit card with the thought ‘I can just pay this off when my pay cheque comes in’. This is in fact incorrect, as even if every dollar you get paid is used to pay off your debt – how will you afford the following pay cycle without using your credit card again?
Your savings account is no longer
In days gone by, a savings account was nearly mandatory for any family or individual. These days, we often have zero in our savings and put every available dollar on credit debt.
If you find yourself without a savings account or a savings account that has severely diminished, it could be another sign of credit card stress starting to take its toll.
You withdraw cash off your credit card
We all know this is a big no-no when it comes to credit cards, though many people still withdraw cash off their credit cards in times of inconvenience or desperation.
The interest rates on cash advances are often extraordinarily high and can cause severe credit card stress. Some cards are even setup to have cash advances paid off last compared to your other purchases, thus increasing the amount of interest you repay.
Avoid cash advances like the plague when it comes to credit cards as they are a sure fire way of creating credit card stress.
What are some other signs of credit card stress? Drop us a comment below to let us know.
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||Alex Wilson is the founder and editor of Savings Guide, Australia’s number one saving money website. For regular money saving tips, visit Savings Guide or follow Savings Guide on Facebook.