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What I Learned From Keeping A Running Credit Card Balance, And How You Can Avoid It

credit-cards

For the past few months, I’ve been foolish in the way I’ve been (or rather not been) making payments on my credit card. I’ve been doing something I never thought I would be guilty of doing, because I always felt as if I had my spending under control — but I don’t. I’ve let my credit card balance creep up, and up, and up, and haven’t paid off significant chunks each month. I used to religiously pay off my credit card balance in full each month, but I have to admit that it’s been several months since I’ve done so. What feels so insane about this is that I do have the means to pay it off (from my money in savings), and yet I still don’t. It’s simply boils down to this: I’ve had an incredibly difficult time parting with my money in savings when I know I’m not bringing in money the way I used to. The behavioral pattern of charging on a card boils down to a psychological issue — the fact that I’ve been reluctant to watch my little vault of savings decline. This has resulted in me overusing my credit card so that I don’t have to use cash all the time, which somehow dulls the sting of having to open my wallet for each purchase.

You see, ever since I joined TFD full-time, I’ve had to rely on my savings to make ends meet. I’ve needed to tap into that resource to cover my bills each month while our earnings pick up. While it should be noted that I saved diligently for quite a long time to afford myself the opportunity to pursue my dream, and that needing to use savings was entirely expected, it was nonetheless very painful. Never in my life have I felt more reluctant to spend cash, because I can’t stand the sight of my savings balance declining. Instead, I use my credit card for everything, and prefer charging purchases because the delay in payment helps me feel less anxious. And when it comes time to pay the bill, I avoid doing it in full because it temporarily soothes me to not see my checking account take such a big hit.

Of course, the idea that the credit card allows you freedom from payments is absurd. All it does is provide a cushion from the time of purchase and the time of payment, which is precisely the reason why having a credit card can be a dangerous thing for some people. I fully understand that the money at the month’s end has to come from someplace. There is no magic fairy that is going to drop money into my lap and make my payments for me — the chunk of cash I need to pay my credit card bill is removed from my savings account anyway. But I still can’t seem to stop charging purchases because I’ve fallen into the trap of enjoying instant gratification in exchange for deferred payment.  When I had a paycheck coming in every other week, I never charged more than a few hundred dollars on my card, and now that I have very little money coming in, I’m charging even more. A situation that should be flip-flopped.

And yes, charging purchases and then paying them in full each month is good for building up credit, but only if you’re actually doing things intelligently and paying the balance. Leaving a balance every month that is slowly accruing interest is only doing the opposite.

While my desire to preserve cash for emergencies instead of paying off large sums of money wasn’t entirely misguided (as it’s very important to keep a decent amount of cash in the bank in case something unexpected happens) I should have handled the situation differently. I should have been more diligent about not spending money unnecessarily knowing that my income was a lot lower each month than what it used to be. While I did cut back and gave myself a budget, it wasn’t enough, and I simply charged the purchases I knew I shouldn’t be making. It didn’t take me long to realize that what I was doing wasn’t smart, and I could be managing my finances much better. For a couple of months, I was taking a huge unnecessary risk that I’m now kicking myself for doing, but I’m getting better.

As I’ve spoken with financial professionals and have researched online about how to manage credit card payments smarter, I’ve come across a number of helpful articles in the process. Below is a list of the most helpful resources I’ve found on this topic that can benefit anyone trying to take back control over their credit card spending. The articles also explain how you can pay off balances in a way that will be most beneficial to your credit score.

Balances And Credit Card Debt

How To Pay Off Credit Card Debt

In getting myself back on track over the last couple of weeks, through working side jobs and biting the bullet and removing a chunk of money out of savings to pay it off, I’ve been able to get my balance back down to zero. I feel like I can finally breathe easier knowing that I’ve rectified a dumb decision. Neglecting my credit card and mishandling how I charge and pay back the money I’ve spent causes me unnecessary stress, which I can easily avoid if I’m proactive and smart. All it takes is focus and diligence — something I try my best to work on every day.
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  • GBee

    The best advice I ever received was to split up savings account for specific uses. I have a “credit card” account (which I use to pay off my credit card each month), vacation account, future downpayment account, and retirement account…. and maybe a future wedding account, but I am a little embarrassed to admit that.

    i found it was so much more painful to spend money when it was just one lump sum. Like you, I made some decisions that were not so smart- ie. putting off oil changes because it was too hard to part with my hard earned money. I found that when my money had been earmarked for a specific event, it became easier to spend.

    • Summer

      Can you elaborate a little on how you determine the allotment of funds into those different savings accounts? Ie; if you have $200 to set aside for savings with each paycheck, do you disperse the $200 evenly across the various accounts, does it vary from check to check, or…? I’m always curious about people’s saving strategies when they’ve broken it down into something more than just a vague “savings” account.

      • Bethany Amanda

        I have a similar strategy, and what has worked best for me has been calculating how much I need to put in every month to have X amount by Y date. For awhile, this meant putting larger chunks into the accounts for my new car down payment and my wedding, and smaller chunks into my general emergency fund. Now that the first two are done, I’m working towards having X amount for my emergency fund within the next three years. It takes some tweaking to hit the sweet spot between what’s ideal and what’s realistic, but once you find it, this works pretty well.

      • GBee

        Just like Bethany, I calculate what I need to save every month to have X amount by Y date. So if I need to save $50/month for a car and $150/month for a home downpayment, I try VERY hard to always put at least that much in every month.

        My hours were cut back a few months ago, so I stopped putting money into my wedding and vacation accounts because I don’t have enough money to keep contributing to them. That’s also a plus of splitting up accounts, because I can control which accounts still get funded in times of financial stress, and which ones to pull from if needed (ie. credit card and retirement accounts would be the last I would touch).

    • jdub

      That’s a really great idea! I usually just put little notes into my calendar with every paycheque, outlining what I definitely need to save/pay that period and am then free to spend the rest as I see fit. I’ve seen online some people keeping little jars with cash labelled for different things, like vacation, school, new tires, etc. That could also be helpful, if like me, you see money in your account and your knee-jerk reaction is still (even when trying to be responsible!) NEW SHOES PEDICURE LET’S GO OUT FOR DINNER I’M RICH BITCH

  • I started my first-ever running balance when I was offered 15 months no interest if I signed up for a new card. Unfortunately, starting a new job has put paying off in full out of reach a year later and I will soon have to use my savings to pay the balance before interest begins to accrue!
    A powerful lesson to have learned, if it’s too good to be true it probably is!

    http://www.graduatista.com