In many ways, credit cards are very useful tools. They make it easier to shop online, they allow you to have the money you need on you at all times and they offer rewards and cash back to give you some nice perks that you wouldn’t get with cash.
Unfortunately, there is also a downside: They make you spend more money. This is why many people run into issues with debt. They never intended to spend more than they could afford, but credit cards made it possible and psychologically tricked them into doing it.
Why does it happen?
You feel like you’re in full control over how much money you spend, no matter what form it takes. How do credit cards cause you to overspend, outside of simply giving you a high enough credit limit that it’s possible?
The mental trick is this: The money doesn’t feel real.
Say you have $300 in your wallet. You want to make an impulse purchase for $100. You have to reach in and take out five $20 bills. You physically see how much money you have, and then you see it cut down by another third. This puts everything in perspective. Is whatever you want really worth a third of your money?
When you purchase it on a credit card, nothing feels real. You don’t see how much you have or how much you spend. You likely don’t even know what your card balance is at the moment or how it compares to the balance in your bank account.
Cash forces you to slow down and think about your spending. Cards cause you to act quickly and impulsively, without really contemplating the cost. Is it any wonder that people tend to spend more on cards? It’s all too easy to tell yourself that you’ll just deal with it later.
What if you can’t afford it?
If that later day arrives and you suddenly find that you cannot afford your debt, it can be surprising and concerning. Don’t worry. Just start looking into bankruptcy and your other legal options, and you can find a solution.