Too many Americans rely on credit cards not just as a financial tool, but as a way of life – too often they’re living off credit cards and accumulating burdensome credit card debt in exchange.
That’s a problem, as credit card debt is easily the most pervasive form of consumer financial debt, with 60 percent of Americans using a credit card with an average card debt of $6,194, according to Experian. Overall, U.S. financial consumers held $829 billion in credit card in 2019. That’s up $129 billion since 2009, Experian reported.
“Often, people use credit cards as an extension of their paycheck,” said Jeff Rose, founder of Good Financial Cents, an online wealth management platform. “Unfortunately, that’s an easy way to rack up debt.”
Cutting the card cord
What’s the best way to wean one’s self off of a credit card lifestyle? There’s no magic bullet, Rose said. It takes hard work and discipline, but there is a path forward for card-dependent Americans.
The first step is to establish some short-term financial relief, and that’s a where a zero-interest credit card or a low-interest personal loan can help. Use free online tools to find out which kind of credit cards fit your financial situation/
“Try to move your credit card debt into zero or low-interest debt options,” Rose said. “That will help save money on interest charges while paying down credit card debt. As an added bonus, depending on the card you transfer to, you may even score some free points for travel or other forms of credit card rewards.”
Cardholders looking for other forms of debt consolidation can leverage a personal loan if the interest rate on it is lower than the interest rate of other debts.
“Consolidating all credit card debt into one personal loan can eliminate card debt more quickly, especially if the user has only been making minimum payments,” Rose said. “When a card consumer only can pay the minimums, the debt can remain for years. But a consolidated loan at a lower interest rate can steer payments to going to pay down the actual credit card’s principle balance, and not just the interest on the card.”
Card users can search among multiple personal loan options at financial comparison sites like Credible, which offer direct access to low-interest rate loan options.
Taking long-term measures to curb a credit card lifestyle
Once a cardholder has stopped the financial bleeding, it’s time to take some long-term measures to cut credit card debt out for good, financial experts say. Try these tips to curb any dependence on credit cards as a financial lifestyle.
Hit the brakes
The best way to stop over-relying on is going cold turkey.
“That takes having a good household budget, i.e., knowing how much money you have to spend per month, planning that spending, and sticking to the plan,” said Beverly Miller, founder of the personal finance website, Money Coach Bev. “The first month is the toughest because you have to pay the bill for the credit card, and pay cash or use a debit card for current purchases instead of using the credit card. But after that first month, using a budget, it becomes much easier, especially if you don't carry a balance on the credit card.”
Live below your means while you pay down card debt
Carrying a balance of any kind on a credit card is a sign of out-of-control spending, usually due to not paying attention and not having a budget. “When you live below your means, with a plan and a purpose for reaching your long term goals, then your priorities will shift,” Miller said. “Soon, those purchases you crave and pay for with a credit card suddenly seem much less important.”
Make non-credit card usage your lifestyle
“The best way to curb card usage is to take all of your credit cards, seal them in an envelope, write 'Financial Freedom!' on that envelope, and then hide that envelope away somewhere in your house,” said Mike Earl, a certified financial planner at The Wealth Group in Eden Prairie, Minn. “The primary reason folks have a hard time getting out of credit card debt is because they continue making new purchases on the credit cards. So it's one step forward and two steps backward.”
Earl advises trying one month of not using credit cards at all, and build momentum from there.
“When I first did this in my own life about 10 years ago, it was a tremendous feeling to not have access to credit,” he said. “All I had was my debit card and a bit of cash in my wallet, and it led to much greater freedom.”
“Plus, I quickly paid off my credit cards and began saving much more money each month – and got out of the credit card dependence lifestyle for good.