Toxic Credit Card Relationships: 3 Red Flags to Watch For

By Mana Ahmed on March 09, 2023

To best help us understand the power of credit cards, lets first talk about toxic relationships. We all know about them, and some of us have been in one. The beginning is the best part of those relationships, and the ending is the worst part. This article applies that same concept with credit card usage because let's face it, there is a relationship between us and our credit cards. We’ve all been there before - enjoying the convenience and perks of credit cards until they start wreaking havoc on our finances. In this blog post, I’d like to share some tips on how to spot red flags and break free from toxic credit card relationships.

Let's start with the first red flag - depending on your credit card(s) to pay for both core and habitual essentials.

Understanding the difference between core essential expenses and habitual essential expenses are crucial when it comes to managing your finances effectively. I like to reframe the term discretionary spending as habitual essentials because it's the habit that we have developed in our heads that is making these purchases seem like an essential, when it's actually discretionary spending. While core essentials like food, shelter, water, and transportation are basic needs that we all require. Habitual essentials are the things that we've become accustomed to, such as ordering food delivery, smoking cigarettes, or getting our hair or nails done frequently. It is a huge red flag when we are spending money we do not have on these purchases and telling ourselves that it is an essential to have them.

If you're relying on your credit card(s) to pay for these non-essential expenses or even core essentials, then it's time to take a step back and reassess your spending habits. If you can't go a month without reaching for your credit card(s), it's a clear sign that you're in a toxic credit card relationship. You are depending on your credit cards as another source of income and that is a sure way to falling off a cliff.

To break free, try putting your credit cards on a HUGE timeout. Remove them from your wallet, delete them from autopay, and even freeze them in a block of ice. Seriously. By putting your credit cards on this kind of timeout, you can train your brain to think of alternative ways to cover your necessary expenses. This will also help you recognize non-essential expenses for what they are - discretionary spending - and allow you to make more informed financial decisions. This is one of the hardest things to do when you are relying so heavily on these credit cards, but it is also the right action plan for you. Taking a break from your credit cards will help you identify poor spending habits and find better solutions to improve your financial situation.

Moving on to the second red flag - your credit card usage.

If you're not relying on credit cards to pay for your core expenses, and instead use them for cash flow or building credit, that's great! But have you considered what your monthly utilization ratio per card is? It's easy to slowly start using your credit cards more and more each month without even realizing it. And if you're not careful, you could be falling into the red flag of using your credit cards too much.

It's common for people to think that increasing their credit card usage is a good way to build their credit score, but in reality, having a high utilization ratio can hurt your credit score. Did you know that your credit utilization ratio accounts for 30% of your credit score? That's right, using too much of your available credit can negatively impact your creditworthiness. And unfortunately, the average credit card debt for Americans is already at $6,194, indicating that many people are struggling with high levels of credit card usage. In fact, around 84% of Americans have used credit cards to build their credit scores, but it's important to keep your utilization ratio low to ensure that your credit score stays healthy.

The best way to track your habits is to compare your first credit card statement to your current one. If you see an increase in usage, it's time to reevaluate your habits.

If you're feeling anxious about cutting out your credit card usage, don't worry. It's all about finding a healthy balance and using credit cards responsibly! Setting a budget and sticking to it is a great way to keep yourself in check. You can also limit your credit card usage by using cash or a debit card for your regular expenses. Remember, keeping your credit card utilization low is key to maintaining a healthy credit score.

Third Red Flag: Keeping credit card purchases a secret from your partner/spouse.

Financial trust is crucial in any relationship, and hiding credit card purchases from your partner or spouse can damage that trust over time. If you find yourself keeping purchases a secret, it’s important to take a step back and evaluate why you feel the need to hide them.

If this is you, I encourage you to not create a perfectly great explanation in your head to justify this action. Because if you are doing that, HOLD ON! Note that those are called excuses and I am here to encourage you to believe that you are better than that. I encourage you to be more reflective in this area and what may be happening internally. Perhaps you’re embarrassed about your spending habits, or worried that your partner or spouse will judge you.

Whatever the reason, it’s important to address it head-on and have an open and honest conversation about your finances. Here are a few ways to address the issue:

  • Establish open communication: Have an honest conversation with your spouse about your spending habits and credit card usage.
  • Create a budget together and make sure you both agree on how to spend your money.
  • Seek professional help: If you find it difficult to manage credit card spending and communicate effectively with your spouse, consider seeking the help of a financial advisor or counselor. They can provide guidance or support to help you overcome these challenges.

Remember that by working together, you can create a budget that works for both of you and build a stronger, more trusting credit card relationship and family/spouse relationship as well.

In conclusion, credit cards can be a lifesaver in certain situations, but it's important to be aware of the red flags that can lead yourself into financial distress. Sometimes how we are using our credit cards is not healthy for our finances. By paying attention to your spending habits, tracking your credit card usage, and finding a healthy balance, you can break free from a toxic credit card relationship and take control of your financial future.

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