Debt is not something that happens by chance or casually during your daily life. Some bad spending habits lead to debt. If you want to avoid credit card debt and reduce the debt you have, you need to eliminate these bad habits.
1. Spending more money than you earn
The logical part of you believes it’s impossible to spend $2000 a month when your salary is only $1500. Spending more than you earn is easier than you might think. Relying on savings, borrowing from others, and using credit are ways you can spend more money than you bring in.
At some point, these bad spending habits will catch up with you. You will deplete your savings, max out your credit cards, and run out of places to borrow from.
Keep your spending within your monthly income so you live within your means and do not create debt. Reduce your spending to less than your income and use the extra money to pay off your debts.
2. Spending money you don’t have
Spending more money than you earn can be done by spending money you don’t have or money you haven’t earned yet. You spend money you don’t have by using credit cards, loans, payday loans, and overdrafts, etc.
By using these methods to pay bills and make purchases, you are creating debt. If you don’t pay off the debt in full every month, it will continue to increase.
You can resolve this bad habit by reducing your expenses and relying only on your income to pay for your wants and needs. Focus on “needs.”
3. Using credit for everyday purchases
You should use cash (or cash available in your checking account) for everyday purchases like groceries, fuel, clothing, and entertainment. The allure of credit cards is the ability to pay later for items you buy now.
The problem is you’re less likely to pay your credit card bill for items you’ve already consumed, which is most “everyday” purchases. Using credit instead of cash is a bad habit, especially when you don’t pay your credit card bills in full every month.
Some credit cards have reward programs that allow you to earn cash or miles or points by charging more on your credit card. If you choose to maximize your rewards earnings by charging more, only charge what you would have purchased in cash and pay for the purchases right away.
4. Using credit when you have cash
Another bad habit that leads to debt is choosing credit over cash when you have the cash. This convenience of keeping money in your wallet comes at a cost. If you don’t want to pay for it today, you probably won’t want to pay for it tomorrow.
To change this bad habit, you need to be willing to pay for what you want with the money you earned. Although you can defer payment by using credit, you will end up paying more than if you spent cash.
5. Using debt to pay off debt
When you use credit cards to pay off other cards, loans to pay off other loans, you’re not paying anything down. You are merely transferring your debt and accruing more debt each time you do it.
Balance transfers come with transaction fees, and most loans come with some initial fee or origination fee. So, when you use debt to pay off debt, you will end up in a worse situation than you were in at the beginning.
Using debt to “pay off” debt can be beneficial if you can transfer a balance from a high-interest credit card to a card with a lower maximum. However, be careful that the balance transfer fees may negate the interest savings and that the interest rate after the promotional period may be worse than your previous rate.
Transferring
Transfer the balance once or twice to take advantage of a great interest rate different from ongoing balance transfers to avoid credit card payments.
Source: https://www.thebalancemoney.com/five-spending-habits-that-lead-to-debt-960042
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