What Is Debt Addiction?
Almost all of us use credit cards regularly. In today’s world using credit is an accepted practice. So much so that if you don’t use credit cards it actually can hurt your credit score.
Since using credit day in and day out is a normal part of modern culture what is the difference between this common use of credit cards and debt addiction?
Take a look at this clear explanation of debt addiction and some insights into steps to break this harmful habit.
What is debt addiction? Debt addiction is more than compulsive shopping. Someone who is addicted to debt uses debt as a crutch for solving their financial and personal problems without any plan for living differently or getting out of debt. Other signs include living paycheck to paycheck and never planning for the future, constantly being in financial crisis, or being unwilling to take care of oneself in order to pay creditors.
How do you know if you have a debt addiction problem? Lots of people have built up significant credit card debt. It doesn’t mean they’re all addicts or that their debt was incurred for a bad reason. There is a big difference between running up your credit card when you have been laid off, and running up your credit card because you are upset that you have been laid off. Often there is a mentality of, “What does it matter if I put more on my card? I don’t care about my balances and I’m going to ignore it.” Running up debt as a way to avoid having to acknowledge that you don’t have the money to provide for yourself or your desired lifestyle is dangerous territory.
How do you recover from debt addiction? As hackneyed as it sounds, acknowledging that you have a problem really is the first step towards deciding that today is the day you will start to look for a way out. The next essential step is taking a complete inventory of one’s debt and developing an action plan to deal with the debt. Actually facing the amount of your debt is a big step towards acknowledging the role you and your personal demons have played in digging this hole.
– via www.moneycrashers.com
One Way To Turn Debt Addiction Around
As we just saw recognizing that you have a problem with overusing credit is the first step to getting control of your finances and turning things around.
You must first have a clear list of all of your credit card accounts and a plan to pay them off. The only way to achieve a goal is to have it written down so you know what you are trying to accomplish.
Once you have a written list of all of your credit card debt and at least a framework plan to pay them off. You can begin to make progress.
Here is one method that can help you make progress toward ending debt addiction and paying off your credit cards.
Set Up Automatic Payments
First, check with your bank and make sure that your checking account has overdraft protection. Then, for your NEW credit cards, set up automatic monthly payments in the FULL AMOUNT from that bank account. Linking your credit card and bank account in this way will help you automatically payoff the full amount each month which will protect you from incurring those famously high interest rates. The overdraft protection is key in this approach as it will avoid you having insufficient funds to pay the credit card issuer and incurring the high overdraft charges that follow. But please do not consider this overdraft line of credit to be another piggy bank. It is there for emergencies only!
For existing credit cards that hold large amounts of debt that you can’t feasibly pay in full, set up automatic monthly payments for higher than the suggested minimum amount. Paying the minimum amount that is due on your credit card every month will not have much of an impact on your principal balance and you may incur high interest charges on your remaining balance. So, try to never pay the minimum! If you can’t pay the full balance, pay as much as you can so that you can get out of the credit card vortex sooner than later.
– via Forbes
Do you have more than 3 credit cards?