If you have become reliant on credit cards, it can be hard to stop using them even when your debt keeps rising. You can fall into a habit of reaching for your credit card every time you have an impulse to buy something or simply throwing your everyday expenses on the card, and this can cause you to quickly build up debt.
If you're starting to drown in your debt, you need a strategy to stop using your credit cards before the debt completely takes you under. Here are seven steps you can take.
Lock Them Up
The "out of sight, out of mind" approach might work for you. Put your credit cards somewhere where it takes an effort to get them—in a safe, a file cabinet, the back of your sock drawer—anywhere that's inconvenient. Keeping your credit cards out of your immediate reach will help control your "need" to use them. Some people even take the term "frozen account" literally by freezing their credit cards in a bowl of water. Whatever the method, the key is to force yourself to take extra time to consider the purchase.
Leave Them at Home
You might not have to take drastic measures like literally freezing your credit card in a bowl of water, but you can easily take it out of your wallet before you go shopping. If you get the urge to buy something, you'll either have to use cash or come back for the item once you have your credit card—and after you've had plenty of time to second-guess the purchase.
One call to your cardholder is all it takes to inactivate your credit card. That will ensure you don't use it for impulse buys. Keep in mind, closing credit card accounts can hurt your credit score by reducing the average age of your accounts and raising your credit utilization ratio. Make sure you aren't closing a card you should leave open.
It's better to close your credit card and suffer a temporary credit setback than to go deeper into debt trying to maintain your credit score.
If you're worried about the credit score setback, you could simply reach for a pair of scissors. Cut the card up into small pieces so identity thieves can't decipher it or, better yet, shred it with an office shredder. The card will be unusable, but after you have had time to improve your spending habits, you'll be able to get a new one from the card issuer. Just remember that shredding your card won't do anything to address any debt you may have already built up on the account.
Do Some Shock Therapy
Have you ever thought about the amount of money you spend on interest payments each year? Or the length of time it will take to pay off your credit cards? Sometimes taking a long look at the numbers will shock you into putting your credit cards away for good.
For example, assuming monthly payments of $25, a $1,000 balance with 14% interest would take over 4.5 years to pay off. If the timeline isn't enough to shock you, take the total price tag into account—you'll have paid an extra $355 in interest by the time you pay off the original $1,000 purchase.
Credit card statements now include the amount of interest you've paid so far this year and the amount of interest you'll pay if you're just making the minimum payment. Before you let your debt pile up with impulsive buys, think about all the other things you could eventually buy with the money saved from avoiding interest payments.
Positive reinforcement goes a long way in building a habit. This isn't just true with training a new puppy—it's true for people, too. Establish goals for yourself and allow yourself to indulge if you reach them. For example, every week that you don't use your credit card, you could treat yourself to a dinner date with a loved one.
Make sure the rewards you come up with don't erase the benefits of your savings goals.
Old-Fashioned Self Control
Being able to tell yourself "no" is a skill that goes beyond using credit cards. The same self-discipline that gets you to work on time each morning can also be used to stop using your credit cards. Think about another bad habit you've conquered and how you did it. Apply those same principles to your battle with credit card debt.