Do you ever get your credit card bill at the end of the month and wonder how it got so high? You don’t feel like you were spending any more money than you normally would. But somehow the balance is spiraling out of control.
It’s not just in your mind. Studies have found that credit cards do make you spend more. One claimed that people pay around 12 to 18% more, as opposed to making similar purchases with cash. Another report claimed that they would spend 409% more. The truth is likely somewhere in the middle, but it is clear that spending goes up when you use a credit card.
Factoring in the interest
Another thing to consider is that credit cards have very high interest rates. If you’re not paying off the full balance that you owe, you are paying interest on the remaining balance. This could also be why it seems like your balance keeps growing. The minimum payment may be all that you “have” to pay, but it also may be lower than the fees and interest that you’re adding to what you owe.
Feeling the pain
So why do people spend more on credit cards, potentially putting themselves into this vicious cycle in re: their interest rates? The reason, according to some researchers, is that you don’t really “feel the pain” of making that purchase. You know that you have a month to pay off the card. It feels like pretend money, rather than real money. Of course, all money is invented, but credit cards give you an extra bit of distance. This makes it seem OK to spend more than you would have ordinarily.
With cash, you can’t spend more than you have. This doesn’t necessarily mean that there aren’t financial issues when using cash, but simply that it is impossible to spend more cash than you actually have on hand. That is not true with a credit card, and it makes a big difference.
What are your options?
The good news is that you do have options if you’re facing high levels of debt. For instance, you may want to consider Chapter 7 bankruptcy to get a fresh financial start. You just need to know exactly what legal options you have and what steps to take next. Seeking legal guidance is a good place to start.