Lies that get us and keep us in debt

ImageWe’ve all done it. We all lie to ourselves from time to time about our finances. We tell ourselves what we want to hear even when we know it’s false. Here are some common ones that plague even the best of us. 

1. The card rewards make it worth it: If you pay off your card each month, the rewards can be great, but, according to the Wall Street Journal, people with rewards cards get about $25 a month in rewards, but they spend an average of $68 more. So, if you’re not careful, those “rewards” will lead you into more debt.

2. We deserve it: This one is evil and has tricked even the most diligent of us. Perhaps you’ve had a hard week at work, and spending $150 on a fancy dinner that you can’t really afford seems like a good idea and something you’ve earned. The problem is that it’s like taking one step forward two steps back. The “reward” just digs you deeper and deeper into debt.

We all need a break now and again. But if you are fighting against credit card debt, don’t go into more debt or risk losing what you’ve gained as a reward.

3. Everyone has credit card debt: No they don’t. A lot people don’t have credit card debt. They budget and live within their means. Credit cards were never designed to pay for day to day expenses, though the banks and credit card companies want you to use them that way so they can squeeze more profit out of you.

4. It’s a bargain: Bargains are great, but they shouldn’t be used as an excuse to spend more than we have. Great deals also shouldn’t be used to buy more than we need. Great deals come and go pretty regularly. Plus, it’s not a great deal if you spend a ton of money on credit card interest paying off the debt over months or even years.

5. It’s not much money: It’s so easy to spend money we don’t have if we spend it in small amounts. 

The same is true with “small” credit card debt. Enough “small” charges on the card over time can grow into a mountain of debt. If you are fighting your way out of credit card debt, there is no such thing as a small credit card charge.

6. The payment is small: Over time small expenditure adds up to big money, especially if you’re paying credit card interest on it. Most cards calculate the monthly payment at about 2% of the outstanding balance, so payments are extremely small compared to the amount owned.

For example, you can nab a $1,000 TV and “only” pay about $20 to $30 a month for it. Remember, the payment may be small and mangeable at first, but buy enough on credit and the payments grow substantially. On top of that, you still have to pay back the borrowed amount with interest.

7. It’s an emergency: Sometimes we go into debt by convincing ourselves that we have an emergency. Certainly there are times when a true emergency arises. A good example of a real crisis is medical expenses. But many times what we call an emergency isn’t really an emergency. Whether it’s a second car that needs repair, or even our child’s college education, we can often go without addressing what at first seems like an urgent expense. If life or liberty isn’t at stake, it’s probably not a true emergency.

8. 0 APR on purchases: 0 APR and low interest credit cards can be like a drug dealer giving away his product for free–at first. Once your hooked, prices go up, way up. In the case of credit cards, once the 0 APR introductory rate expires, interest rates can easily soar into the double digits. 

9. It’s for my business: A business credit card, particularly for small companies, can serve many important roles. Business cards can be used by employess to easily track their expenses. They can also help keep your business expenses separate from personal expenses. But like all credit cards, business cards can also cause you to spend more than you should. With businesses, it’s easy to justify the expense as necessary that you may be able to do without. All small business owners have to decide for themselves, of course, just how necessary an expense is, but with business credit cards, it can be easy to spend more than you should.

10. I’ll pay it off after graduation: This is the most insidious credit card lie of all. Study after study shows that the outstanding credit card balance for college students increases as they near graduation. There are a lot of reasons for this, but one reason is that they convince themselves that they can handle the debt once they graduate and get a job. The problem is that they start out in the work force already in the hole. The average undergraduate has a $3,173 credit card balance. Add student loans and most college grads start out their professional lives snowed under.

Have you ever told yourself a lie about credit card debt? Know any common ones we missed? Comment below.

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4 thoughts on “Lies that get us and keep us in debt

    • Good one! We hear that one ALL the time. “If I just made more money…”, but the truth is, if you are not handling a little money well, you won’t handle a lot of money well either.

  1. How about its need to establish and/or improve my credit score. As Dave Ramsey might say, you only need a credit score if you plan to go further into debt and that’s usually not a good plan.

    • Excellent point! We often say this to counselees who are obsessed with their credit score like it is a reflection of themselves. It may be their good credit that got them into the mess in the first place.

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