This guest article was written by Beverly Harzog. Beverly is a nationally recognized credit card expert, consumer advocate, and author of Confessions of a Credit Junkie: Everything You Need to Know to Avoid the Mistakes I Made (Career Press, November 2013). She runs a popular credit card blog on her website, www.BeverlyHarzog.com. She’s appeared on Fox News, ABC News Now, CNN Newsource, and is a frequent guest on syndicated radio shows across the country, including ABC News Radio.
Two years ago, I watched Confessions of a Shopaholic with my daughter. If you’re not familiar with the movie (or the book), I can summarize it for you in three sentences.
A finance journalist named Becky Bloomwood is a shopaholic. She goes on spending binges and ends up in horrible credit card debt. She can’t pay her bills and is pursued by a sleazy debt collector.
This is all especially funny because she’s a finance journalist, which gives it a cute, ironic twist. So I’m watching the movie and laughing hysterically until I realize something awful: I used to be Becky Bloomwood. No, I’m not kidding.
When I got out of college, I went through years of overspending. I’d worked my way through college, and when I got a job, I went a little crazy. I’d never had real money before. I worked in an office and, back in those days, everyone dressed up for work. So I bought designer clothes, expensive shoes, and went out regularly for power lunches.
Do I sound like I was greedy, immature, and irresponsible? Why, yes, I was all those things. My spending also had an emotional component, though. I was clearly insecure and thought all the designer duds would make me feel like a professional.
My story has a good ending, at least. I did finally face up to my debt and got a grip on my credit life. I paid off my credit card debt and even went on to become a credit card expert.
Do you think you might be a credit junkie? Here are five signs that you might have a dysfunctional relationship with your credit cards.
Sign #1: You fall in love with every credit card offer
When you see a sign-up bonus, you get way too excited. Free money! This is only a good deal if two things are true: You need the type of card that’s being offered and you can earn the bonus by purchasing items you were planning to buy anyway.
Too often, people get caught up in getting the “free cash” or “free airline ticket” mentality and they don’t realize they’re wasting money to earn the rewards. The only way to profit from credit cards is to pay your bill before the due date and to use the card for purchases you needed to buy anyway.
Sign #2: You sign up for retail cards while you’re in the store
Signing up for bunches of retail credit cards to get an instant discount is related to Sign #1. But many retail cards have super-high interest rates, so if you carry a balance on a retail card, you’re never going to reap the benefits of that on-the-spot 15 percent discount.
If this is a store where you shop a lot, it might actually be a good card for you if you don’t carry a balance. But it’s never a good idea to agree to a credit card when you don’t even know the terms. Ask for the information and take it home. Read it carefully and then you can make an informed decision.
Sign #3: You carry a balance, but you aren’t worried about it
Any time you can’t pay your credit card bill in full by the due date, you should feel a little sick to your stomach. I realize that some of you may need your cards to make ends meet and I understand what a dilemma that is. I’m talking about folks who can’t pay their bills because they used their credit cards to buy things that aren’t essential.
Resist the urge to shrug your shoulders and tell yourself that you’ll pay it off next month. This is how debt starts snowballing into more and more debt. Be afraid of the debt. Be very afraid and take action to fix it. Track your spending and cut out unnecessary expenses until the debt is paid off. Oh, and stop using your credit cards.
Sign #4: You ask for a credit limit increase so you can keep spending
This is a big one. And as long as you’re paying your bill on time, the banks are often happy to go along with your request. The more debt you have, the more money they make.
Maxing out your cards trashes your credit score, but if you’re a bona fide credit junkie, you’ll try to rationalize this by saying you don’t plan to apply for new credit anytime soon. But you need to remember that a low credit score costs you money in other ways. For example, you’ll pay more for insurance.
If you’re nearing your limits, take a cold hard look at how you’re spending your money. Put the cards away and go to a cash-only lifestyle while you devise a plan to get out of debt.
Sign #5: You keep your credit card debt a secret
I never told anyone about my debt. You know why? I felt like a loser for getting myself into such a mess. If you’re in debt, it’s helpful to talk to someone so you don’t feel all alone. Seriously, this can happen to anyone.
I don’t mean you have to reveal it online if that’s not your style. Even sharing your dilemma with one trusted friend might be helpful. The power of emotional support can really help you move forward so you do what it takes to get rid of your debt.
What if you feel like you’re drowning in debt?
If you have a huge amount of debt and you can’t think of a way out, don’t hesitate to talk to a credit counselor. There are reputable counseling agencies that can help you decide what your options are. So don’t be afraid to reach out for guidance if you need it.
Do you know of any other signs that someone is in credit card trouble?
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