Are you someone who almost never uses cash? Maybe you just use your credit card most of the time because it’s convenient. Perhaps you get points on that card and so you’re trying to meet certain spending benchmarks.
If so, it’s important to remember that credit cards can actually trick you into spending more money than you anticipated. One way that they do it is by setting up rewards and providing points for certain levels of spending. There are people who will spend more than they can budget simply because they’re trying to get these points.
But there’s also a psychological element to consider. People do not feel the same way when they spend money on a credit card as when they hand someone physical cash, and so they tend to spend around 18% more money on those transactions. Simply going to the grocery store with a credit card instead of cash could lead to overspending and breaking a budget without intending to do so.
Borrowing from the future
This psychological trick essentially relies on the fact that you’re borrowing from the future – and you know it. If you have a month to pay off the credit card, it’s easier to justify a purchase that you want to make but can’t necessarily afford at the time. People will tell themselves that they’ll be able to figure it out when that bill comes due, but then they are not able to do so.
This becomes problematic as fees and interest rates mount. Those who are considering bankruptcy as a way to eliminate this debt should look into all of the options at their disposal.