Credit card addiction is real. Find out what are the symptoms to look out for, and what steps you can take from a financial perspective to rehabilitate yourself. The original version of this article was published by CompareHero.my, dedicated to increasing financial literacy and helping you save time and money by comparing credit cards, personal loans and broadband plans in Malaysia.
What is Credit Card Addiction?
Credit card addiction is when your convenience at swiping that magic piece of plastic spirals out of control. You think you can stop anytime, yet you somehow excuse your behavior to say “I have to use it this time; I’ll stop after this”. As with any addiction, it can have devastating effects on an individual or a family because of the financial implications of spending too much with your credit card, as well as the subsequent money woes that can ruin marriages and careers.
Although they are very easy to use, credit cards are not always the best way to pay for your purchases.
An addiction doesn’t become an addiction overnight. It likely begins as a convenient reason to do something, before going on to becoming a convenient excuse. Then, it becomes a habit before becoming a must-do compulsion.
Here are some common phrases along the way.
- ‘Swipe first, later only check my budget.’
- ‘Aiyah who cares, let’s just buy it already.’
- ‘I have to get that new credit card, have you seen the promo on that?
- ‘Haven’t you heard about cashless? Nobody uses cash anymore.’
- ‘But there is a 20% discount! It’ll never be this cheap again.’
- ‘It got rejected? Wait, try this one.’
- ‘Not going to meet the monthly repayment this month, maybe next time.’
- ‘I love my credit card, I can just use it anywhere these days.’
- ‘Maybe I overspend a little for now.’
- ‘Why save money for later, I’m alive today right?’
Are they familiar? Most of them are harmless on their own, and may even be justified as financially-savvy decisions!
Tip: A credit card is best used for short-term financing.
Credit Card Addiction Causes
You might have recognized yourself in the signs mentioned above, but are you actually aware of WHY you cannot resist spending with your credit card? According to a recent MIT study, it might not be entirely your fault. During a social experiment, people were asked to place bids on NBA tickets while using either cash or their credit card. The people who used credit cards were found bidding twice as high as the people who were bidding with cash.
There seems to be something about credit cards that makes it easier for us to spend money. This might make sense if you think about it, a credit card is essentially an abstract form of payment; it allows you to postpone paying for something that you want to buy right now. You avoid the ‘pain’ of losing money but you still get the good feeling associated with the purchase. This is why credit cards are so dangerous, they make you think you are richer than you actually are.
Breaking the Credit Card Addiction
If you have diagnosed yourself as a hopeless credit card addict, I would like to congratulate you. Awareness is the first step! Most people don’t even realize they are overspending, much less do anything about it. Now that you know what is going on, it is time to proactively improve your situation.
1. Assess your financial situation
The first thing you need to do is get a clear picture of your financial situation. Become aware of all your outstanding debt and your monthly credit card spend. A good way to do this is by creating a personal income statement.
2. Stop using your credit cards
Next step is to stop using your credit cards completely, at least for now. Be paying for everything directly, you will be confronted by the cost of the purchases that you make and you will automatically start spending less. Once you have a little more control over your finances, you can then selectively start using credit cards again. Be smart about spending and avoid the pitfalls of credit card use.
3. Take control of your debt
Depending on how much debt you have, you might want to take a debt consolidation loan or get a balance transfer card. There are a lot of offers out there that can help you restructure your debt and better your situation.
4. Establish and emergency fund
Even if you have insured yourself against everything, you might still be faced with financial challenges once in a while. By creating an emergency fund, you make sure that, whatever happens, you always have something to fall back on.
5. Create shopping lists every time you go out shopping
As you have probably experienced yourself, shopping can be an expensive hobby. A good way to reign in your shopping spend is to make shopping lists. By committing to a pre-determined list of goods you want to buy, you will be less likely to be swayed by promotions and less likely to buy things that you don’t actually need.
6. Leave your wallet at home
If you don’t plan on actually buying anything, why not leave your wallet at home? Much like the previous suggestion, it is sometimes wiser to just deny yourself the possibility of impulse purchases. It’s like an insurance against yourself.
7. Face your demons
Compulsive spending may be covering up a bigger issue in your life. Get professional medical help to resolve these issues. Or, talk it out with a trusted friend. Remember that life’s downs are there so you can feel amazing when you climb back up. Your life ahead is brimming with potential and there are exciting things waiting for you to discover them just around the corner!
Credit cards are not fundamentally evil. In fact, they do bring some advantages. It is our control over our choices that we need a firm hold on. As the old adage goes “Everything in moderation.”.
Have you ever been a credit card addict? Do share your experience with us in the comments.