5 Signs You’re Addicted to Credit Cards

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How do you know if you have an unhealthy attachment to your plastic — and are potentially vulnerable to a mountain of debt? BankingMyWay has five red flags that suggest your relationship with your credit card is headed into addiction territory.

First, know that Americans, even despite these though financial times, love their credit cards. Check out these statistics:

  • In 2008, consumers had an average of 5.4 cards, according to an Experian (Stock Quote: EXPN) market report.
  • The U.S Census Bureau reports that there were 159 million credit cardholders in the U.S. in 2000, 173 million in 2006 and it estimates that number will hit 181 million by 2010.
  • The Census Bureau also reports that there were nearly 1.5 billion credit cards in use in the U.S. in 2006. According to The New York Times (Stock Quote: NYT), a stack of all those credit cards would reach more than 70 miles into space, and be almost as tall as 13 Mount Everests.

Why do we have so many credit cards? Maybe it’s the way we view credit.

Historically, credit cards aren’t that ancient — in fact, they’ve only been with us for about 50 years. The first widely accepted credit card was issued in 1958 by American Express (Stock Quote: AXP) and the first general-use credit card that allowed balances to be paid over time was the BankAmericard (later changed to Visa (Stock Quote: V) which came out in 1959.

The idea, at least from card issuers, wasn’t to spend money you don’t have with a credit card. Rather, it was a convenience — you didn’t have to stop at the bank for cash to buy those Chuck Taylor basketball sneakers. You could use your plastic instead, thus saving you a trip.

But over time, too many U.S. consumers decided that credit were essentially free money for the time being, and thus spent happily without worrying about the bill coming due in 30 days (and even then, a minimum payment would suffice).

The “spend now, worry later” mindset is one we've had for the past 20 or 30 years, and it took a major economic downturn to snap us out of it. Data is emerging that Americans are doing a better job in keeping balances low and using their cards more sparingly post-recession.

But, if that doesn’t sound like you, and you’re worried that you still view credit cards as “free money” maybe it’s time to get a grip.

To see if you’re addicted or not, check the following list of “red flags” that indicate your attachment to your plastic is an unhealthy one:

1. You have both a debit card and a credit card in your wallet, but use the credit card to make a purchase. It’s smarter to use the debit card and pay as you go. Using the credit card only adds to your debt burden.

2. You own two or three store credit cards. Getting into the habit of having plastic in your pocket is a sure sign that you have an unhealthy attraction to credit. Pare back the store credit cards and use cash or a debit card to make store purchases. Better yet, stay out of the mall altogether and buy your clothes and shoes at discounters like Marshall’s or TJ Maxx (Stock Quote: TJX).

3. You only pay the minimum balance. If you can’t use a credit card, and then pay off the balance within a reasonable amount of time (say, three months or less) that suggests you’re too dependent on your card. If you can’t pay more than the minimum balance, put the card in a desk drawer until you do pay it off.

4. You spend more than you earn. If, at the end of the month, your credit card balance exceeds your monthly income, you’ve got a real problem. If that happens, get the scissors out and cut the card up and work to pay off the debt. Don’t close your credit card account, though — it could hurt your credit rating.

5. Take the “emergency” test. If you habitually use a credit card, and want to stop, try this tip: When you have the merchandise in hand, ask yourself if it meets the "emergency" standard that credit cards should operate under. A broken-down car on the highway is a real emergency — a sale on leather jackets or tickets to a ballgame isn’t.

The trick in detaching yourself from unhealthy credit card practices isn’t a complicated one. Just look at your credit card statement first.

Then, if you look in the mirror and don’t like what you see, it’s time to cut the cord — and cut up your cards.

Hopefully, then you’ll have a much healthier addiction — an addiction to cutting debt out of your life.

Financially at least, you’ll live happier ever after.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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