How Reliance on Credit Cards Affects Financial Habits

At the mall one afternoon a young girl and her mother were discussing the possibility of buying a new collection of DVDs.

“I really want to get these. These are my favorite,” the girl insisted.

“I’m sorry, we can’t. We don’t have the money for that right now,” Mom said sternly.

But the girl quickly figured out the problem and nonchalantly explained her solution. “Just write a check,” she said.

Rather than try to explain the idea that a person must have money in their checking account before writing a check to buy something, Mom denied the request once again and they left the store.

Although the girl was thinking in terms of checks and not credit cards, her mindset was exactly the type of thinking that can lead to bad habits for credit card holders.

“We don’t have the money for that right now. But that’s OK. Let’s just pay for it with the card and not worry about it.”

Laying down a card and walking out of a store with a specific item or collection of articles can be very convenient – and it can even rescue someone in a time of need.

When a person does that once in a while, it can provide a great safety net. But if that happens three or four times and becomes a habit, then it can damage a person’s finances.

He ends up ‘paying’ for several things he can’t afford with his card. Then when the actual bills come in and he sees how much must be paid back, he suffers through a painful realization.

The credit card allowed him to ‘spend’ more than his income has provided. Now he must follow a payment plan to slowly pay the bill – along with some interest thrown in to benefit the company that provided the card.

Such a lesson is usually a difficult one to learn. But people who get attached to the idea of using plastic and get more cards before they learn that lesson could set themselves up for long term failure.

For example, someone who has purchased items with three different credit cards could find himself paying on the bill for a flat-screen television 12 months after leaving the store. The same type of situation is likely to happen on the other two cards as well – regardless of the item.

When the habit becomes ‘buying’ what a person cannot afford with a credit card, the bills can pile up very quickly. And then it can take an eternity to pay those bills and the interest that comes along with them. As a result, the person spends a lot of time asking, “Why did I do that?”

A person who relies on credit cards is also likely to be online or on the phone quite a bit checking to see how much credit is available before going to the store. Those who aren’t careful may also need time to check and see a card is at or near the credit limit (‘maxed’ out).

This evidence proves that a reliance on credit cards doesn’t just affect financial habits. It impacts a person’s life in many other ways. So before the bill gets any bigger, it is important to take charge.