Recovering From Credit Card Shock

Cha-ching. Is it just us, or is all you hear dollar signs every time you pay with your credit card? And let’s face it, we all dread that time of the month- when your bills start rolling in. And once you take a look at your bill and see where all the charges have added up then the shock of how much you’ve gone off-budget and overspent this month.  And to pay it off, because you have blown your budget, you now have to dip into your savings to pay off the balance. Or you are leaving a balance and not able to pay off the entire amount that’s due which means you are now accumulating interest. According to Finder Canada, the majority of Canadians have a credit card. In 2017, 89% of Canadian households reported having at least one credit card, according to the Bank of Canada. The data also found credit card use is on the rise, with the number of Canadians reporting they have a credit card increasing by 7% from 2013 to 2017. Credit cards are used daily and sometimes in preference to cash or debit. Because they are such a popular payment method for Canadians; if you are not keeping track of your spending, these unchecked purchase habits (hearing the dollar signs again) can result in getting stuck in the continuous monthly debt cycles and down the road impact your long-term financial goals.

What happens once the shock wears off and you realize that you can’t pay off your credit card balance on top of your other monthly expenses? It is time to take a hard look at your finances. Before you continue spending, taking a look at your expenditures is the first place to start to see how you overspent that month. Was there an unexpected or emergency expense you had to put on your credit card? And now that the charges are on your card and a new month of spending has started adding up do you have a financial plan in action to help get yourself back on a budget? Before you fall into the revolving credit card debt cycle of owning more and more every month, And if you are in need of immediate financial help, it could also be time to start a loan application with us.

Feeling Stuck

It’s easy to get caught in the revolving cycle with your credit card. Just when you think you have paid it off, more charges go right back on it. According to a report released in 2015, nearly half of all Canadian credit cardholders (46 per cent) are carrying credit card debt. So what does this mean? It means you’re not alone. It is easy to describe this feeling like you’re stuck and you don’t know when or how to get yourself back on track. Especially when it comes to your money, you never know when the unexpected could happen and more money has to come out, causing the cycle to continue. Every time you think you’ve paid off a good chunk of your debt, something else comes along and then you are right back on to feeling stuck and what feels like the never-ending cycle of trying to pay off your credit card balance.

Besides winning the lottery, how do you get out of this cycle of feeling stuck financially? Everyone has their own personal finance tips and ways they like to handle their money, and we have heard of everything including people putting their credit cards in the freezer! Unless you have a money tree in full bloom growing in your back yard, this is something that will take a lot of time and money management. And if you’re feeling really stuck, we’re always a click away if you need quick cash. But before you make any decisions, check out what to do before applying for a payday loan. So when it comes to your credit card, always focus on paying off as much of the balance as possible. And by slowly chipping away at it (with limited spending and using it of course), you will start to see that number go down. It’s all about being diligent by monitoring the ins and outs of your money and staying on top of your finances!

Don’t Run From It

Have you ever been concerned about swiping your card and it being declined? This is never a good feeling and one of those things you shouldn’t have to worry about. You don’t want to be maxing out your credit cards since the interest you pay on credit card charges is one of the highest out there. And one of the worst things to do in a situation like this is run from it. You don’t want to miss payments (like any bill) as this will not only affect your future finances, but it will also affect your credit score. If you start to notice that your monthly balance is continually growing and you are unable to make monthly payments in full, it is okay to stop using your credit card until you can properly manage your finances and look for ways to help get your budget back on track. But continually spending and only paying the minimum won’t get your balance down.  A good tip from About Money is to keep your spending within 30% of your credit limit making payments easier to manage. Check out these FAQs because ignoring these payments will only make it worse, but that’s where people like us here at GoDay come in. We can help get you the cash you need to keep you afloat until your next paycheck and can pay off these debts. And surprisingly enough our loans can be a lower interest and larger timeline than what your credit card company would provide you with.

Stick With Cash

As we mentioned above, not using your credit card and sticking with cash is one way to help get your credit card balance under control. Everyone likes their cash. But physically having and only using cash to pay for purchases is what some people prefer. But others like to use cards for all their purchases. What it really comes down to is how you manage your money. Some prefer cash only because it helps them keep track of their spending better, compared to those who like to use their cards for different reasons like the rewards systems they offer that can help you save on other things. According to a Bankrate.com survey, just one out of three millennials carries plastic compared to the majority of older Americans. In addition, the Financial Post also reported that a survey found that those in the 18 to 24 demographic preferred to pay cash compared to others. And if they do carry a card, it tends to be a prepaid or debit card. By using cash only, you are seeing first hand where your cash is going and by only having so much of it available, it will also help curb your spending habits on what may be unnecessary items that you never realized how much you were spending money on (which we know can easily be done with your cards). This is also a great opportunity for you to re-evaluate your budget and contribute what you would be spending to help pay off the credit card debt you have.

Financial Game Plan

Whether you want to try not using your credit card for a while or only sticking with cash, the only way to fully recover from credit card shock is to create a financial game plan. And creating a budget is the best way to get yourself back on track. By creating a budget, you’ll be able to lay out all of your expenses, bills and be able to see the big picture of where your money is going so you can start to reallocate it to paying off your credit card. And with a budget in place being able to see where your money is going can play a big role in your future financial success. It’s not only about knowing how much money you are making but being able to identify your spending is one of the first steps in managing a successful budget. Instead of pushing it aside or worrying about it later, it is important to keep your spending top of mind. Not everyone keeps track of what they’re charging to their cards, but by throwing purchases onto your credit card without keeping your budget in mind is what leads you into debt or not being able to make full payments on your credit card in the first place. By being aware you are in debt and that you have blown your budget will help you be more cautious when it comes to your spending. There shouldn’t be any extra expenditures when you’re already in a financial bind, and by understanding how you got yourself into this financial situation is what needs to be addressed. But we understand that it’s not always that simple. And that situations may arise that can cause you to put unexpected purchases on your credit card in the first place. When it comes to managing a successful budget it’s about finding what works for you and ensuring that you’re living within your means. Overspending and losing track of our money happens, but having a financial game plan in place is what will help you not be afraid to look at your credit card statement next month.  

Break Bad Spending Habits

So where do you start when it comes to finding the cash to pay off your credit card? Raise your hand if you’ve purchased something impulsively. What about something you saw on social media or because it was on sale and you wanted to treat yourself? It’s okay to do these things (within reason), but you have to make sure they don’t lead to bad spending habits and ones that you can’t pay off. You should also stop making these types of purchases when trying to save or when you’ve blown your budget. This is how this credit card shock happens. Because you don’t see these types of purchases and expenditures adding up on your credit card until your statement comes in, it is time to start paying more attention to what you may be charging to your credit cards and time to watch where your money is going. But these days, technology has made it so much easier for you to stay on top of your bank accounts. Transactions happen quick but can take a while to show up on your card, so make sure you are fully aware of your monthly statement and how that money is adding up so you can avoid the credit card shock altogether. We can confirm- you are not the only one who has put purchases on your credit card thinking that you will worry about paying it off later. It is recognizing what you are spending your money on and understanding the next steps on how to get yourself out of debt that will have the most impact on your bank account.

No one likes to financial stress or surprises when the bills come in the mail, so it’s up to you to gain control of your spending. You will be happy you know what your statement will say at the end of the month. Do you have any tips when it comes to your credit card bills?  Check out our latest blogs for more tips and tricks to manage your finances.

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