Questions to Ask Yourself Before Swiping Your Credit Card

Millions of Americans are managing credit card debt that was incurred due to circumstances beyond their control. This may include job losses, medical bills, divorce and rising living costs, but some people may be battling the same scenario due to overspending or mismanaging their income.

I read today that retail credit cards have reached 175 million, the highest they have been since December 2009. The latest data also shows that lending to subprime (people who do not have such a great credit score) borrowers increased in May by nearly 14 percent over its recession low in 2010. Relaxed lending standards have resulted in roughly 13.8 million new retail card accounts year-to-date through May, so this made me think about wants vs. needs when it comes to purchases.

There are several ways to reassess your spending habits and determine if certain purchases are contributing to debt. When you are trying to pare back credit card balances, it’s crucial to know what caused the debt in the first place to try to avoid similar behaviors moving forward.

The simplest action you can take before swiping your credit cards is to ask if you can truly afford to make the purchase. Being more cognizant about how purchases will impact your wallet can be a strong first step toward changing harmful spending habits that are making it more difficult to chip away at existing bills and save money.

While you may have the available funds on credit cards to make the purchase, how much will it contribute to your current balance and how long may it take to pay off? Understanding these factors when you are about to swipe your credit card may force you to think harder about the benefits of an item.

Another important question to consider is whether you truly need the item. For example, will the purchase bring something positive to your life that will help you accomplish a goal? In addition, you might also consider whether you can acquire the product at a more affordable price online or in another location. You can also wait until it goes on sale. Most credit counselors encourage individuals to institute a three-day rule before buying something. Waiting for this period of time may help curb impulse buys, which can save a person a great deal of money in the long run.

If you assess your potential purchase and decide that it is affordable and necessary to your goals, you may save money by paying for the item in cash or saving up for the product. This ensures that you don’t rack up additional credit card debt.