Published in: Credit Cards | Oct. 24, 2019

4 Warning Signs Your Credit Card Spending Is Out of Control

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Are you going crazy spending on your credit cards? Here are some warning signs that you're not handling credit responsibly. 

Spending money with credit cards is actually smart. You can earn rewards for each dollar spent and score cool merchandise, cash back, or free trips with credit card points or miles programs. But it only makes sense to spend on credit cards if you can do so in a responsible way.

Unfortunately, far too many people aren't able to handle having a credit card because the temptation to spend irresponsibly is just too strong. How can you know if you're one of them? Just watch for these four red flags that suggest your spending is out of control. 

Young woman shrieking as she tosses a bunch of clothes into the air.

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1. You've maxed out your credit cards

Maxing out your credit cards is bad news for many reasons. First and foremost, if you keep charging up to your credit limit, you won't have any credit available to you if you need it -- and you'll probably struggle to pay your balance off each month. 

Spending up to your credit limit can also hurt your credit score. That's because credit utilization ratio is one of the most important factors in determining your score, which will suffer if you use more than 30% of the credit available to you. Try to keep your spending well below this limit to avoid lowering your credit score and making it harder to borrow in the future. If you can't, that's a problem.

2. You struggle to pay more than the minimum

Credit card companies require you to make only small minimum payments each month. But If you make only the minimum payments, it will take you years to repay your debt and you'll pay a fortune in interest.

Ideally, you should be paying off the full balance of your credit card when the bill is due so that you pay no interest. Otherwise, any interest you have to pay will not only negate the value of any rewards you earn -- because the interest costs are so much higher than the reward's value -- but it will also make the full cost of every purchase more expensive.

If you can't pay the full bill, you should at least pay more than the minimum due so that a larger portion of your payment goes toward paying down the principal. Otherwise, much of the minimum payment goes to interest only and you don't make any real progress on your debt. If you can't pay more than the minimum, this is a major red flag that you have spent too much and you need to get serious about debt payback

3. You have no idea how much you'll owe each month

Although you don't necessarily have to keep track of every single dollar, you should have a rough idea of what you've put on your credit card so that you know you can afford to pay it back out of your bank account.

If you find yourself mindlessly reaching for the plastic and are shocked by how high your credit card balance is each month, this suggests you need to get your spending under control. 

4. Your credit card debt is affecting other financial goals

Are your credit card payments so high that you can't afford to save for retirement or save for a down payment on a home? Are your maxed-out cards hurting your credit score so much that you can't qualify for the car loan you need to buy a vehicle so you can get to work? Is your debt-to-income ratio so high because of your cards that you can't qualify for other financing?

If so, you need to get a handle on your credit card spending so that it stops having such a negative impact on other important financial transactions. You definitely don't want to end up in a position where you can't do things that matter just because you've charged so much on your cards. 

You can get control of your spending

The good news is, if your credit card spending is currently out of control, you can take action. You just need to make a plan to pay down what you owe and to live on a budget. Watch what you spend in general, limit the amount you charge and don't spend more than you can pay off each month. With a bit of effort, you can learn to use credit cards responsibly and reap the benefits that they provide. 

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