At A Glance – Out of control credit card debt is the enemy of your money and your future. Discovering your purchasing patterns will help break the cycle of debt.
Have you ever looked at your credit card statement and thought, “How the #@%$ did I get here?!” Or watched it inch up every month thinking it’s not THAT bad, only to realize it’s gotten bigger than the neighbor’s dog!
If you can identify, you’re not alone. Credit card debt is massively out of control. But what to do?
Here are a few thoughts on how credit card debt can balloon out of control and what to do about it.
How Did We Get Here In The First Place?
1. The Buy It Now Mindset
Credit card debt can get out of control because we have a “buy it now” mindset. Our culture has become one of instant gratification. If you want it, need it, or even think you need it, you should get it! Right? Your friends will tell you, “You deserve it!” If you don’t have the money today…No Problem…put it on the card. The only problem is all that “deserving” has to be paid for. Unfortunately, you are using tomorrow’s dollars to fund today’s lifestyle. This mindset will get you in trouble before you even realize what’s happened.
Keeping up with friends or family causes problems also. It’s hard to say no when everyone is going out for drinks after work. What about that new grandbaby across the country you want to go see? Or how about the latest iPhone? We want to appear we have it all together, and that doing what everyone else is doing is no problem.
What to do: Plan ahead for large purchases, save up and pay cash. Establish a 72-hour rule. Wait 72 hours before making any major purchases. You may discover you really don’t want it that bad.
2. Pay Attention!
Our credit card debt can also get out of control because we just don’t pay attention. We’re in a hurry, so we put it on the card. We mindlessly buy things and realize later that we really didn’t get any joy from that purchase.
Stephen and I dug a huge hole in our early years because we didn’t pay attention. There are still times when we have to unwind mistakes.
What to do: Pay attention! Don’t make purchases because you are in a hurry, or because you haven’t planned ahead.
3. Making Only Minimum Payments On Your Credit Cards
Credit card debt gets out of control when we only make minimum payments. Credit card companies make it easy to buy what you want and only make that small minimum payment. Lots of folks think the minimum payment is all that’s required. The problem is the balance will increase faster with spending than it will decrease with minimum payments. You’ll never get ahead like that.
Credit cards carry some of the highest interest rates in the lending industry. They are probably the highest rates of any loan you have. I received an email from my credit card company last month (February 2021) that informed me the rate on my card has changed and could go as high as 29.99%! What! This is a premium card and I have good credit.
Here are some examples of what minimum payments can do.
The first chart shows how long it would take to pay off $500, $2,000 and $5,000 balances with minimum payments and 18% interest. This assumes adding no new purchases to the balance.
| Card Balance | Int. Rate | Min Pymt | How Long to Pay Off | Total Paid (Int.+Card Balance) |
| $500 | 18% | $25 | 2 yrs | $599 |
| $2,000 | 18% | $75 | 2 yrs, 11 mo. | $2,573 |
| $5,000 | 18% | $125 | 5 yrs, 2 mo. | $7,692 |
This next chart shows how long to pay off the same $500, $2,000 and $5,000 balances with minimum payments and 29% interest. Again, this assumes adding no new purchases to the balance.
| Card Balance | Int. Rate | Min Pymt | How Long to Pay Off | Total Paid (Int.+Card Balance) |
| $500 | 29% | $15 | 2 yrs, 4 mo. | $691 |
| $2,000 | 29% | $75 | 3 yrs, 8 mo. | $3,247 |
| $5,000 | 29% | $125 | 11 yrs, 11 mo. | $17,804 |
Do you see the last one? If you bought a nice leather couch and put it on a credit card at 29% interest, you would pay over $17k for it in the end!!!
The reason these balances go up so quickly is that credit cards accrue compound interest and not simple interest. This is where compounding can work against you. If you don’t know how compounding works, read my article What Is Compounding And How To Harness Its Power. This explains what compounding is and when it works for you and against you.
What to do: Pay as much as you can each month to eventually pay off the balance. Once your balance is $0.00, pay the balance in full and on time every month.
4. Skipping Payments Or Paying Your Credit Card Bill Late
Credit card debt gets out of control if we miss the payment or pay it late. On most cards, the interest rate automatically increases if you are late with a payment or miss it altogether. If several payments are late the rate will go up to that 29.99% I talked about earlier. No thank you!
Also, don’t forget about the late payment fee. On top of the ridiculous interest rate, you will be charged a late fee. Right now my card is charging $40. This adds to your balance AND will also start to accrue interest.
This habit of making minimum payments and paying late sets up a downward spiral that can be devastating to your finances and your emotions. Many people wake up one day and find they are so deep in a hole, there’s no way out. I have been there, done that! It’s a hopeless and helpless feeling.
I’m not going to sugarcoat this. If this is you, then you need to take action. NOW! It won’t be fun, but YOU CAN DO IT! I’m here to help you through this. I’ve got your back!
What to do: Plan ahead so you have the money to make the payment and set an alarm on your calendar, or set up automatic payments.
What Does The Bible Say?
God calls us to be good stewards of everything we have. All we have comes from Him and belongs to Him. “…for every animal of the forest is mine, and the cattle on a thousand hills.” Psalm 50:10
Having large amounts of debt brings disorder and chaos to our lives. “For God is not a God of disorder but of peace.” I Corinth. 14:33
We are not prepared to join in on God’s plans or opportunities if all our money is spoken for before we even earn it!
What do you do now?
If you have discovered that you have too much credit card debt, there’s only one thing to do. Stop using them and pay them off. It won’t be easy, but it will be the best thing for your future self.
The entire process of how to pay off your credit cards is explained in How To Pay Off Credit Card Debt In 6 Steps. When you work through the process of paying off your credit cards, you will have freedom and control. Freedom from fear and anxiety and control of your future.
You may also have other debt in your life that needs to be addressed. After paying off credit cards, you will have the skills and the mindset necessary to attack the rest of your debt. You are now in a position to create the amazing life you want.
Key Takeaway – Out of control credit card debt is the enemy of your money and your future. Discovering your purchasing patterns will help break the cycle of debt.
If you need any help or encouragement along your journey, use the contact form to contact me, leave a comment below or go to the Started At 50 Facebook group.
Have you been able to pay off some of your credit card debt? Great! Leave a comment so we can all celebrate with you.
Assignment – Look at each transaction on your last one or two credit card statements. Do you see a pattern? Do you see unnecessary purchases? Commit to using cash and paying off your credit cards.
