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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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Published on November 11, 2020

10 Best Ways to Save Money Faster and Smarter

10 Best Ways to Save Money Faster and Smarter

People love to talk about budgeting, reducing spending. and investing. But unfortunately, talk is cheap, and poor money management is expensive. It’s easy to talk about the best way to save money, but putting it into practice is a different thing.

What people need to talk about is the practical and efficient ways you can quickly save money to accomplish your goals. After all, they don’t teach this stuff in school.

Here are the 10 best ways to save money faster and smarter.

1. Cancel All Your Subscriptions

Yes, all of them.

Okay, you can keep your wifi and trash. But other than that, cancel all your monthly subscriptions for one month. You will survive, I promise. Better yet, you will realize you won’t miss all of them.

Now that you have had 30 days to examine what you really missed and what you never thought twice about, you can add some of them back in. The others? you never have to think about them again.

This is something you can and should do with every part of your life. If it’s clutter, cancel it. Being able to step back and see what is cluttering your life and what is excelling your forward helps improve your quality of life and financial standing.

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2. Automate Savings From Your Paycheck

Many of us are so excited about getting a new job that we rush through the paperwork during the hiring process. Good news for you, I have had lots of jobs so I have seen it a million times.

There is an option for a portion of your paycheck to go directly into a secondary savings account. This is by far the most effective way to save money every month. We tend to spend most of what we have. So, if we take it off the top first, then it’s less likely to be spent. Just head over to HR and ask. It will only take two minutes.

3. Cancel the Happy Hours for the Rest of the Pandemic

We are in the middle of a global pandemic, which means that there is no better time to buy some drinks from the local store and stop shelling out $5 a drink at the local cocktail bar. When we look back at our bank statements, we are always shocked that fast food and alcohol can add up so quickly. You can easily save a couple of hundred dollars just by taking this step.

A great exercise is to print out your last bank statement and highlight all the areas of alcohol and fast food. The amount may surprise you and make you think twice about that old fashion.

4. Online Grocery Shopping

Some people think online shopping increases the amount they spend. For the most part, I would agree—except for this category.

Online grocery shopping is now a no-brainer, though. Whenever you walk through a grocery store, two things always happen: you always grab impulse items, and you never know the total of your cart until you checkout. This means that we always spend more than we originally planned.

With online shopping, you can see your total as you add items to your cart. You are way less inclined to make those impulse purchases and because of that, I would venture to say that you could even pay to have them delivered to your door and still save money each month by choosing online grocery shopping.

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5. Get a Famzoo Debit Card

This is something my wife and I swear by, and it’s great for the entire family! Famzoo strictly exists to help families and kids budget their money better. Each month, my wife and I have an allotted amount loaded onto our pre-paid Famzoo debit card. This amount has changed every year depending on promotions, kids, stage of life, etc.

The important part is that when you give yourself the freedom to spend a certain amount, you are more likely to only spend the allotted amount. Think of it as a diet. If you are counting calories, you are more likely to stick close to the amount you set. You can also look for some tips online to better stick to your family budget.

6. Purge

This is actually my favorite to do, and it is actually one of the best ways to save money. Raise your hand if you have ever moved. Okay, so everyone.

When we move, we are always amazed at how much junk we have acquired. I have found that about every 6 months, I can find a couple of boxes to sell online of things that we never use. This not only gives you so extra quick cash, but it also keeps your house more tidy and organized.

Now, go clean out that garage!

7. Amazon Subscribe and Save

32! That is how many items I have setup on amazon subscribe and save. Let me explain.

This sounds expensive, I know. But it actually saves us hundreds of dollars per year! We all need toothpaste, shampoo, razors, laundry detergent, toilet paper right? This feature is truly a triple threat. When you have more than 5 items on subscribe and save, you automatically unlock the max savings for every product on your list. This can be up to 20% per item!

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Now, even better is that it ships straight to your door on the exact day you want the item, maybe monthly or maybe you only need it every 4 months. This way, you never have too much or never run out. Either way, it’s totally customizable.

Lastly, there is no contract for any items, which means you can switch brands or items at any given time at no cost. My advice: every single staple item should be on your subscribe and save.

8. Rewards

This may ruffle some feathers, but if you are using your debit card for purchases, you are missing out on free money! We have this notion that credit cards are evil but in reality, they are the same piece of plastic as your debit card.

How you use it can be bad, don’t get me wrong. But if you want my opinion though, ditch the debit card and get a rewards credit card. Use it just like you would your debit card and make sure to pay it off as soon as the statement comes in!

Just to give you an idea of how powerful this can be in terms of money, here are some things that our miles have paid for:

  • 4 nights in Vail with Flight
  • Rental car in Vail (convertible might I add)
  • Flight to Ireland
  • Flight to Hawaii
  • Multiple staycations at very nice Hotels

That’s roughly about 7 thousand dollars in travel expenses so far! Remember that the credit card is just a tool and can be one that benefits you if you use it wisely. Ironically, this can be an effective way to save money.

Pro tip: If you don’t trust yourself carrying around a credit card, then set up all your monthly bills with your credit and leave it in a drawer at home. This way, you rack up miles but don’t get tempted to overspend.

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9. Vacation With Friends

Now, I know travel is hard right now but what a perfect time to go grab an Airbnb in the woods with a couple of friends and detox from the world right now!

Vacationing alone can be pricey and get rather boring quickly, but if you split lodging and set out for a road trip, it can become affordable quickly! For a couple of hundred bucks apiece, you can have one of the most relaxing vacations ever. Don’t forget to pick up your food at the local grocery store to avoid eating out every meal!

10. Make a Budget

When is the last time you updated your budget or made one for that matter? Making a budget is like writing down your goals. If you don’t make a budget, then you will struggle to save.

How can you know if you are spending wisely if you are not tracking everything?

Our advice would be to get a finance app like Mint, Every dollar, or personal capital. All these apps are free and do a tremendous job of tracking spending and budgeting. I still am old-school and have an excel spreadsheet which I do highly recommend.

Work Smarter, Not Harder

The entire goal is to boost your bank account while reducing the effort required. Efficiency is the name of the game, and automation is the key player. Luckily, we live in a world that has more perks than we can ever take advantage of. But if I were to choose a few, it would be the ones above.

Taking on all 10 of these steps may seem a little daunting. You can first try to pick three of your favorite and start there. Saving money doesn’t have to be a chore as long. As we use the tools correctly, it can be quite effortless. And now, you have a great blueprint to get started!

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Featured photo credit: Sharon McCutcheon via unsplash.com

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