Milwaukee Journal Sentinel

3 signs you may need a credit card hiatus

- Melissa Lambarena

When your finances start to spiral and it becomes increasing­ly difficult to keep up with credit card payments or build toward financial goals, switching your payment method temporaril­y to cash or debit could help.

Spending with credit cards can stimulate the brain’s reward center and drive you to make more purchases, according to a study by MIT Sloan School of Management. The 2021 study had a small sample size of 28 participan­ts, but other research also finds that people are likely to spend more with credit cards. However, it is possible to avoid overspendi­ng and the costs of interest charges on outstandin­g debt by using cash instead.

A vacation from credit card spending isn’t for everyone, though. If you want to preserve your credit scores, you’ll still need to keep zero-balance credit cards open and active with small recurring purchases such as paying for streaming service subscripti­ons or other similar transactio­ns. Issuers may close inactive accounts, which can cause credit scores to drop.

By not piling new purchases on your credit cards, making more progress on debt or savings is possible. If you need a sign to determine if this course is right for you, here are some instances when shifting your spending to cash or debit can make sense.

You frequently overspend in certain categories

You might not need to go cold turkey on your credit card spending. If you tend to overspend only in specific categories, consider setting aside a fixed amount of cash or funds on your debit card to cover those expenses. For those purchases that don’t lead your budget astray, continue using a credit card and paying it off in full every month to avoid interest charges.

If, however, you usually overspend across multiple categories, using only cash may help you stay on track.

You’re an emotional or impulsive spender

You may not be aware that you’re an emotional or impulsive spender. However, it’s possible to get an idea by reviewing credit card statements and reflecting on the reasons behind the purchases, says LaQueshia Clemons, a financial therapist at Freedom Life Therapy and Wellness in Connecticu­t.

“When you get upset or whenever you’re emotional, this may be when you find yourself on Amazon or going to the mall,” Clemons says. “As a way to avoid negative feelings, you may find yourself buying items because this can give you a euphoric feeling to replace the negative emotions.”

You can’t see a way out of debt

If your credit cards are maxed out or you’re struggling to keep up with minimum payments, it’s time to come up with a strategy to pay off the debt.

After several layoffs early in her career, Aileen Luib, a digital content creator based in California, says she had to rely on credit cards to get by. Her combined balances grew to $10,000 by 2015, putting a wrench in her plans, so she came up with a new one. “I was doing a lot of different things to rack in the money and chip away at that debt as quickly as I could,” Luib says. “I was kind of tapping into my skill sets to start scraping up money in little corners of my life, and it all added up.”

Luib says she also used a balance transfer to consolidat­e debt from several credit cards onto one with a lower interest rate, and she didn’t add new purchases to the card. With these tactics, she says she paid off her balance in 2017.

Balance transfers typically require a good credit score of 690 or higher. The ideal balance transfer card will have an interest-free window long enough to pay off debt, no annual fee, and a balance transfer fee of 3% or lower. To determine if a transfer is worth it, consider whether the balance transfer fee costs less than what you’re projected to pay in interest charges on the current credit card. You’ll also make more progress on the debt if you stop putting new purchases on credit cards.


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