Question:
How can I avoid the credit card trap?
2010-07-07 20:18:09 UTC
This is embarrassing to admit, but I am extremely bad with money. Whenever I have credit cards, I have somehow trained myself to think that this is MY money, and money that I can and should use. I am getting ready to pay off all of my credit cards, and I really don't want to get trapped again. When I'm stressed out with debt, all I can think about is the ridiculous amount of interest I'm paying, the other things I could be doing with the money I use for my payments, etc. And when I DON'T have debt, I seem to forget all about how I felt when I was in debt and I somehow feel entitled to get in debt again...I know that sounds idiotic, and it is.

I want to know how a person who doesn't have credit card debt thinks. I want to develop the same mindset as that type of person, and get into the same habits, so that I won't fall into debt again.
Six answers:
CatDad
2010-07-07 20:23:48 UTC
Sometimes self discipline is not enough....You have to force yourself to stop using credit and to pay off your cards. You can enter into a non profit debt management plan...You'd get lower rates to pay off your cards...and as part of the program, you'd have to cut up your cards and pay off the debt. Referral at: www.nfcc.org

Other options:

- Cut up your cards yourself and pay down the balances

- Call all creditors and request credit limit reductions. This may hurt your credit score.
Chris A
2010-07-07 22:15:33 UTC
Dave Ramsey's advice is dangerous and unprofitable. His advice is based upon the belief that debtors can never again be trusted to use credit. Fortunately, he is wrong, because people almost always can change their mindsets. It just takes commitment and the right tools. It took me years of living on cash and debit, but I developed the discipline to use credit responsibly. Maybe you can do it faster?



The key to successful use of credit is to use it as a payment tool, and nothing more. If you're not yet ready to do that, freeze your credit cards in a block of ice and let them chill for a few months while you live on cash/debit. When you're ready, thaw them out and start using credit as a payment tool. Don't look at it as a way to access someone else's money, but simply as a way to access your own money. Once you use it, it's gone. It's no different than a debit card or the green stuff. In fact, you might want to rotate your payments through cash, check, debit, and credit, so they all have the same feel. When you can treat $100 of credit the same way you treat $100 of cash in hand, you have beaten the credit card trap.



Here's another idea to reign in credit spending: Keep two accounts at your bank. One of them is for you, the other is for the credit cards. At the end of the day, add up everything you charged on the card and transfer that amount from your account to the credit card account. This serves two purposes. First, it makes credit card use hurt. Every time you use it, your account gets a little lighter. Second, it guarantees you'll have enough to pay the bill at the end of the month, because you've already transferred the entire balance into "their" account. When the bill is due, all you have to do is use your bank's billpay or your credit card's webpay to transfer the contents of the credit card account to the actual credit card issuer. (You get to keep whatever interest was earned in the "credit card" account. This time around, THEY will be paying YOU interest.) If it helps, you can pay the card issuers more than once a month. That way there will be less temptation to dip into your credit card account.



It may help to approach spending like a dieter. Instead of counting calories, you're going to be counting pennies. Decide how much you're going to spend on credit in a given month. Deposit that sum in the bank. Carry a check register with you and, every time you use the credit card, deduct that amount from the balance in the register. Dieters rarely realize how many calories they eat until they start counting; that's how they got overweight in the first place. Is the same thing true for credit card debt? I believe creditaholics and overspenders can benefit by recalculating their bank balance every time they spend something. It will help you cut the fat out of your diet, and make you think twice before you buy the metaphorical Twinkie.



As you interact more with your money and see how it flows, you will develop control of it and a sense of responsibility that you might not have had before. You'll feel every dollar leaving your possession, and you'll start finding ways to hold on to those dollars longer. Saving more, spending less, looking for little deals--how to earn more interest, get more points, maximize your cashback.
bdancer222
2010-07-07 20:34:18 UTC
It's not just running up the credit cards. You need to look at your spending habits and realize you don't need to buy everything you want. You make a realistic budget and live within your means.



Then your credit cards become a short term convenience instead of expensive, long term financing. In other words, don't charge more than you can pay in full every month. If you can't discipline your spending habits, perhaps you shouldn't have any credit cards and just stick to cash on hand.
financialpeas
2010-07-07 20:23:10 UTC
The joy of being debt free.



All that "stressed out" feeling ... not here. The peacefulness of owning what I have and not having to make payments is great, and I will never let that be disturbed by "stuff" or credit card companies.



In addition, interest will kill your ability to save money for the future. Time to grow up and have self discipline about your finances.



Take the Financial Peace University course on daveramsey.com and get on the forums, so you will be connected with others who are beating debt. The challenge and fun of getting out of debt and winning against the marketers and bankers who try to trap you into overspending is soooo much easier when you have others you know in the same boat.



Be proud to be debt free when you get there, and learn to hate "stuff" that isn't yours because you bought it on credit. You can do this! Win!
rowsey
2016-12-07 13:47:20 UTC
confident, credit is mandatory to construct a credit, despite if that is not mandatory to stay. i'd particularly have a below-average credit checklist and funds to make my purchases with. a sturdy credit has no longer something to do including your internet extremely worth. A millionaire who does not borrow funds could have a below-average credit. in case you pay funds to your purchases you do no longer pay activity. Take all of that funds to take a place and you'd be prosperous-as a substitute of turning out to be the mastercard agencies prosperous.
?
2010-07-07 21:18:23 UTC
the best tactic I have found is to establish your own limit on your new credit card. for example a generous company says - we trust you so much, we are going to give you a $5,000 limit! kindly turn that down and establish a $500 limit - that way you stay in control.


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