3 signs it’s time to pause your credit card spending

by: Melissa Lambarena , NerdWallet

Posted: Jun 10, 2023 / 10:00 AM PDT

Updated: Jun 10, 2023 / 10:00 AM PDT

(NerdWallet) – When your finances start to spiral and it becomes increasingly difficult to keep up with credit card payments or build toward financial 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 recent study by MIT Sloan School of Management. The 2021 study had a small sample size of 28 participants, but other research also finds 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 might not need to go cold turkey on your credit card spending. If you tend to overspend only in specific categories, consider setting aside a fixed 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 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 reflecting on the reasons behind the purchases, says LaQueshia Clemons, a financial therapist at Freedom Life Therapy and Wellness in Connecticut.

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

If you realize you might be in this category after reviewing your purchases, stop spending with credit cards and analyze your financial habits, she says.

You might also consider meeting with a financial therapist if it's difficult to accomplish financial goals or you’re in a continuous cycle of debt. The Financial Therapy Association has a directory to help you find a professional.

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 layoffs 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 different 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. (An online interest calculator can help.) You’ll also make more progress on the debt if you stop putting new purchases on credit cards.

With less-than-ideal credit, you still have options if it's becoming increasingly difficult to meet payments. Consider meeting with a counselor from a nonprofit credit counseling agency. They aren't mental health professionals, but they can offer financial guidance and help you determine whether you qualify for a debt management plan that consolidates debt into a single payment with a lower interest rate. Your credit cards may be closed if you enroll in this plan, so expect to shift to cash or debit to cover expenses.

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