used responsibly, credit cards are a useful addition to
your wallet. They’re not only safer than cash, they
can also build your credit rating. And some cards
include rewards programs, helping you save money on
with the accessibility of credit, there’s also the
risk of overuse and debt. So many people have fallen
into the credit card trap, Americans owe a collective $1
trillion in credit card debt, according to the Federal
Reserve. And, a recent GOBankingRates survey found
respondents have nearly $7,000 in credit card debt, on
the major reasons people are piling on more credit card
Splurging on a wedding: A fairy-tale wedding can create
a memorable day for couples and their guests. But some
couples go overboard and end up spending more than they
can afford on a wedding. The average cost of a wedding
in the U.S. has skyrocketed to a new high of $35,329,
according to The Knot 2016 Real Weddings Study.
most of your wedding expenses on a credit card is a bad
idea, and what may not seem like much starts to add up
very quickly and soon becomes overwhelming," said
Ogechi Igbokwe, a certified financial educator and
founder of OneSavvyDollar, a website that helps students
manage their personal finances. "It’s dangerous
to start a wedding on credit because it shows you’re
not planning adequately as a couple."
than feel the pressure to throw an impressive wedding,
be realistic about what you can afford as a couple,
create a budget and then stick with this budget.
wedding doesn’t have to be elaborate as long as both
parties are present with their loved ones," Igbokwe
Spending more to earn rewards: Credit card rewards
programs are attractive and allow you to earn points,
miles or cash back on every dollar spent. But the
earning potential of a rewards program can also
translate into more debt.
are battling more credit card debt because they are
making more purchases with their cards," said
Alayna Pehrson, a digital marketing strategist at Best
Company, a review website that ranks thousands of
companies, including credit cards. "Many Americans
reap rewards from using their credit cards, which
encourages them to use the cards more frequently."
not to say rewards cards don’t have their benefits.
But if you’re going to use a rewards credit card, make
sure you pay your balances in full every month to avoid
debt. Determine how much you can afford to put on the
credit card each month, and then charge only what you
can pay in full.
Striving to promote an image: Some image-conscious
people are too concerned with how they come across to
others, and they attempt to fit into a particular social
class at the expense of their personal finances. Rather
than live within their means, they use credit cards to
finance a more exciting lifestyle.
what I’ve noticed, people are purchasing more luxury
items with their credit cards (when they can’t afford
to) because it promotes a desirable image," Pehrson
occasional splurge is OK, but spending more than you
earn on a regular basis could leave you broke. So rather
than overspend to keep up with the pack, change your
mindset. The desire to maintain a certain image might do
more harm than good in the long run. You could end up
with out-of-control debt, a lower credit score and less
money in the bank.
Suddenly losing a job: "Most people assume that
credit card debt comes from living beyond your means,
taking lavish trips and buying unneeded items,"
said Sarah Hollenbeck, a personal finance and credit
card expert at Credit Cards by Offers.com, a website
helping consumers find the best credit cards. "But,
if you’re unemployed for a while and living off your
cards, debt can come from mundane things like groceries,
gas and utility bills."
a perfect world, everyone would have six to 12 months of
income tucked away for a rainy day. Because saving a
large amount of money is challenging at some income
levels, the slightest change in income or employment
could trigger higher debt — hence the importance of
building a cash reserve.
Insufficient emergency savings: While on the topic of
cash reserves, the lack of an emergency fund can also
contribute to higher credit card debt. According to a
2017 GOBankingRates survey, 57 percent of Americans have
less than $1,000 in a savings account.
you can’t predict a job loss or any other unexpected
event for that matter — a car repair, home repair or
emergency travel — take extra measures to ensure that
you’re prepared for the unexpected. The more cash in
the bank, the less you’ll need to rely on credit to
keep your head above water.
to saving money every week, even if it’s only $25. To
drum up additional cash, reduce how much you spend on
monthly subscriptions, entertainment and shopping, and
then gradually increase your contributions to savings.
More access to credit cards: Another reason for higher
credit card debt is that more people have access to
lines of credit. And with more people swiping their
credit cards, the average amount of debt per household
banks and credit card companies have become more lenient
throughout the years when it comes to who is approved
for a credit card," Hollenbeck said. "Since
some of the newly approved consumers are those with
lower credit scores, the national debt continues to rise
as more and more cardholders accumulate debt with higher
An increase in autopilot subscriptions: "Another
contributor to debt in recent years are services and
subscriptions that are on autopilot, that consumers
either forget they have or have grown to neglect the
cost of," said Lindsay Sakraida, director of
content marketing with DealNews, a comparison shopping
website. "Unlike normal recurring bills of this
nature, like electricity or cable, they’re very small
in cost and consistent, so it’s easy to overlook them
and ignore how they contribute to overall bills."
minimize credit card debt, limit the number of auto
subscriptions on your credit cards, and periodically
take stock of automatic monthly payments charged to your
cards. You might be paying for services that you no
longer need or use.
Living in a cashless society: A cashless society is
convenient because you don’t have to worry about lost
or stolen money, or being caught in a situation where
you don’t have enough cash on hand for a purchase. But
at the same time, this approach to spending makes it
easier to disassociate the effect a purchase has on your
financial stability, Sakraida said.
a credit card gives you the ability to buy almost
anything, anytime, regardless of how much money is in
your account, it becomes very easy to not even consider
whether you should buy it," she said.
get out of a habit of swiping your card for any and
every purchase, carry a credit card only when you intend
to make a purchase with the card, and don’t wait for
your statement to arrive to make a payment. If you
charge an item to your credit card, immediately pay off
the purchase to avoid debt and interest charges.
Getting sucked in by promotions: Credit card issuers
know how to entice customers. Some credit cards offer 0
percent interest on balance transfers and purchases for
a certain number of months, and other credit cards give
sign-up bonuses when customers spend a certain amount
within the first 90 days of opening an account.
while these promotions are attractive, they can also
encourage spending. Rather than get sucked into a
promotion and spend unnecessarily, use a credit card
only when you need something — and when you can afford
to pay it off.
of financial knowledge: If you don’t know how to
manage credit cards responsibly, there’s also a risk
of making mistakes with your credit card, like charging
up your accounts and carrying high balances from month
to month. You might assume that as long as you make your
minimum payment every month, you’re on the right
track. But maxing out a credit card can lower your
the amount you owe typically makes up 30 percent of your
credit score, maintaining good credit also involves
minimizing revolving debt. As a rule of thumb, credit
card balances should never exceed 30 percent of your
cards are convenient and flexible, but they can also get
you into trouble if not used responsibly. Credit cards
might be the preferred payment method for some
Americans, but it doesn’t have to be your preferred
method. So learn how to manage cards the right way, and
get out of the habit of carrying high balances from
month to month.