A good credit history can help you get great interest rates on a car or mortgage. Credit can give you access to things you might not ever otherwise purchase such as new household appliances, carpet, or renovations inside your home. It can honestly be a part of any well-disciplined savings and financial plan.
The problem is that it never ends there. People abuse their credit and get themselves into all kinds of trouble. If you don’t think so, just ask one of the millions of college students who’s managed to rack up debt before they’ve even graduated and found their first real job. How’s that for a dose of cold, hard reality?
Don’t let yourself succumb to the temptations of easy credit. Simply ask yourself these simple questions and see if you can avoid problems before they occur.
Do You Know How Much You Owe?
If you’ve been making minimum monthly payments seemingly forever, just to keep multiple credit cards and personal loans in play, you may not be fully aware of how much you owe in total. Do you pay any of your debts down at all, or does it seem as though they never get any smaller? Research indicates that if you’re carrying debt worth $12,000 or more, you are unlikely to pay it out completely unless you get some help from a debt counselling service. If you owe this much or more, or are entirely unaware of how much you owe, you may be addicted to credit.
Are You Aware Of How Many Debts You Have?
If you have multiple sources of credit to service, like loans, credit cards, and interest free purchases, you may be addicted to credit. Too many lines of credit can be too much to manage or keep track.
Keep things simple by minimizing your debts as much as possible. Consumer Finance recommends that you keep your debt to income ratio below 43%. Personally, I’d make it even less if you’d like to stay off the edge of the cliff. Trust me -your finances will thank you later!
Are You Using Your Credit Card For Cash Advances?
Are you having trouble getting loans and regularly using the cash advance feature on your credit card has consequences? Did you know that any and all interest free periods are void if you use your card for cash advances? The exceptionally high interest rate is then applied across all your purchases on that card. Using your credit card for cash advances on a regular basis is a major red flag for credit addiction.
Do You Have Any Savings?
There are certain savings milestones you should hit depending on which age bracket you’re in. Have you reached them? No?? Your next question is why not? If it’s because almost all your income goes towards making minimum monthly repayments to your creditors, it is very sure sign that you may be addicted to credit.
Do You Take Frequent Advantage of 0% Interest Balance Transfer Deals?
If you’re using these types of offers to enable your abuse of credit, it’s time to stop and think. The 0% interest rate balance transfer deals can be a godsend when you’re trying to get your credit under some sort of control, but if you’re still wildly addicted to credit and living beyond your means, these kinds of offers only serve to fuel these behaviors. Using these deals three or four times inside a two year period would be an indicator that you may have a problem with managing your credit.
Ignoring a problem won’t make it go away, and if you do have an addiction to credit, recognizing this is the first step to solving that financial problem. Once you know you have a problem with credit, you can begin to deal with it. With some help and a disciplined plan you can get out from under your debt.
To find out if you’re addicted to credit, ask yourself the above five questions. You can access more information on managing credit from debt counselling services.
Are you, or is someone you know, addicted to credit? Tell others why in the comments below.
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