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This Is How Credit Cards Are Manipulating You Into More Debt

This Is How Credit Cards Are Manipulating You Into More Debt

Unlike payment plans, credit cards are not bad in and of themselves. While some credit cards are worse than others, the main offender is the way we use them. But it’s not a coincidence that the spending habits of many are negatively affected by credit cards. In this article we’ll take a look at some of the reasons why credit cards seem to breed bad economic decisions, indirectly manipulating you into more credit card debt.

1. Credit Cards Are Overly Convenient

Some recent studies show that the convenience might be the biggest factor. When people have to fork up cash, there is a tendency to do much less meaningless spending. But when using a credit card, because you don’t have to deal with the extra middle-man of actual money, or worry about whether or not you can afford it, everything becomes almost too painless. Often leading to little or no consideration before a purchase.

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2. They Enable A Very Instant-Gratification-Focused Mindset

The advantage and, perhaps for most of us, disadvantage of the credit card is that you can use money you don’t have instantly. For someone who needs to restock his supply of ramen to avoid starving, great. But there is a huge downside as well. It enables us to prioritize instant gratification, and forsake long-term thinking and planning. The worst examples of this are people who abuse credit cards to live like kings for a couple of months, only to spend the rest of their adult lives repaying their debts. Thankfully these examples are fairly rare, and most of us manage to keep our inner big spender in check to one degree or another.

3. They Have Absurd Interest Policies

When we think about interest, we’re usually thinking of the annual interest that comes a long with a standard bank loan. But credit cards are different. In return for the perceived convenience, they often offer what amounts to interest rates of well over 20% annually on anything you fail to pay back. But because they count the interest month by month, it doesn’t sound like too much. “Oh, only 2% interest per month! That’s not too bad.” Of course this varies slightly from card to card. Some credit cards also have insane penalties if you miss a payment.

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4. They Enable You To Spend More Than You Earn Or Have For No Reason

The thing that makes the painful process of applying for a loan so reasonable, is that you should have a damn good reason to apply for a loan. And also have done the necessary research and preparation. Credit cards—although on a smaller scale, granted—enable you to spend money you don’t have for no actual reason. Which can lead to things like people buying new clothes “just because they felt like it,” when in reality they had no money to buy them with.

5. They Make It Hard To Keep Track Of Spending

Well, you could perhaps argue the contrary. If you bother to go online and check once every day, the numbers are lined up for you nice and tidy. The problem is that it is so easy to not keep track. When you use cash, you have to continuously withdraw money to then spend it. That way how much money you’re spending always registers, and you have some oversight as to your total spending for the week or month. But when you’re always using a credit card, it doesn’t register in the same way. Even after going way beyond your means, the credit card doesn’t tell you that you’ve already spent last month’s paycheck and then some. It almost encourages it.

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To avoid inducing personal bankruptcy and not getting their money back, many companies have started stricter policies about their credit limits. But sadly, the purpose of a credit card is not our convenience, but to make the issuer money. So it is unlikely that the credit card companies will take further steps that hold you more accountable for your everyday spending. Therefore, it is ultimately only by taking responsibility yourself that you can change.

If you do your research and chose the right credit card, you can actually save money and get bonuses like frequent flyer miles as rewards for your spending, provided you stay diligent and always pay up in time.

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Further reading: The Mental Roadblocks Of Paying Down Debt, And How To Face ThemTravel Hacking Guide | Advanced Travel Hacking: The Credit Card Blitzkrieg | Gaming The System: How To Make Credit Cards Work For You

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Ragnar Miljeteig

Ragnar is a passionate writer who blogs about personal development at Lifehack.

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Last Updated on January 21, 2020

How to Develop a Millionaire Mindset in 6 Simple Steps

How to Develop a Millionaire Mindset in 6 Simple Steps

We all like to dream about being financially wealthy. For most people though, it remains a dream and nothing more. Why is that?

It’s because most people don’t set their mind to achieving that goal. They might not be happy in their current situation but they’re comfortable – and comfort is one of the biggest enemies of growth.

How do you go about developing that millionaire mindset? By following these simple steps:

1. Focus On What You Want – And Take It!

So many people are too timid to admit they want something and go for it. When there is something that you want to accomplish don’t think “I could never actually do that”, think “I could do that and I WILL do that”.

Millionaires play to win, not to avoid defeat.

This doesn’t mean to have to become a selfish jerk. What it means is becoming more assertive and honest with yourself. You don’t have to grab off other people. There is a big pot of unclaimed gold in the middle of the table — why shouldn’t you be the one to claim it? You deserve it!

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2. Become Goal-Orientated

It’s almost impossible to achieve anything if you don’t set firm goals. Only lottery winners become millionaires overnight. By setting yourself attainable goals, you will get there eventually. Don’t try to get rich quickly — get rich slowly.

Let’s take the idea of making your first million dollars and expand on what kind of goals you might set to get there. Let’s also say you’re starting at a break-even position – you’re making enough to get by with a few luxuries, but nothing more.

Your goal for the first year can be having $10,000 in the bank within a year. It won’t be easy but it is doable. Next, you need to figure out the steps you need to take to achieve that goal.

Always look at ways to make growth before cutbacks. With that in mind, you might want to see if you can negotiate a pay rise with your boss, or if there’s another job out there that will pay better. You might be comfortable in your old job but remember, comfort stunts growth.

You may also have other skills outside of your workplace that you can monetize to boost your bank balance. Maybe you can design websites for people, at a fee of course, or make alterations to clothes.

If this is still not enough to make the money you need to save $10,000 in a year, then it’s time to look at cutbacks. Do you have a bunch of old junk that someone else might love? Sell it! Do you really need to spend $10 on your lunch everyday when you could make your own for a fraction of the cost?

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If you are to become a millionaire, you need to start accumulating money.

Here’re some tips to help you: How to Become Goal Oriented and Achieve More in Life

3. Don’t Spend Your Money – Invest It

The reason you need to accumulate money is for step three. Millionaires tend to be frugal people, and that’s because they know the true value of money is in investing. Being your own boss goes hand-in-hand with becoming a millionaire. You’ll want to quit your regular job at some point.

Stop working for your money and make your money work for you.

Rather than buying yourself a new iPad, that $500 could be used to invest in the stock market. Find the right shares (more on that later), and that money could easily double within a year.

There’s not just the stock market — there’s also property, and your own education.

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4. Never Stop Learning

The best thing you can invest in is yourself.

Once most people leave the education system, they think their learning days are over. Well theirs might be, but yours shouldn’t be. Successful people continually learn and adapt.

Billionaire Warren Buffet estimates that he read at least 100 books on investing before he turned twenty. Most people never read another book after they’ve left school. Who would you rather be?

Learn everything you can about how economics works, how the stocks markets work, how they trend.

Learn new skills. If you have an interest in it, learn everything you can about it. You’d be surprised at how often, seemingly useless skills, can become extremely useful in the right situation.

Start developing the habit of learning continuously: How to Create a Habit of Continuous Learning for a Better You

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5. Think Big

While I advise to start off with small goals, you absolutely should have a big goal in mind. If you have a business idea, then that is your ultimate goal – to start that business and make a success of it. If you want to invest your way to millions of dollars and do little work other than research, then that is your big goal.

There is no shame in not achieving a big goal. If you run a business and aim to make $1 million profit in a year and “only” make $200,000, then you’re still significantly ahead of most people.

Aim for the stars, if you fail you’ll still be over the moon.

6. Enjoy the Attention

To be successful, you have to be willing to promote yourself and enjoy the attention to a certain extent. Now the attention doesn’t need to be on yourself, it could be on your brand, but attention definitely attracts money.

Never be embarrassed to get your name out there. That means finding a spotlight and being brave enough to step right up underneath it.

If you run a business, try contacting the local papers. You’d be surprised at how amenable they often are to running a story about you and your business, and it’s all free publicity.

Above all, remember: You control your own destiny. Push hard enough for anything and you’ll get it.

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Featured photo credit: Austin Distel via unsplash.com

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