Credit Card Warning Signs - How to Tell You're Headed for Trouble

/ BY / Credit 101

Credit cards can add flexibility to budgets and give us the freedom to do anything from rent a car to make a large purchase. Used properly, they are a fantastic resource. But they can turn on us in a moment if not handled properly.

Luckily, there are easy-to-recognize warning signs that, when heeded, keep us out of trouble.

Warning Sign #1 - Maxed-out Credit Cards

It’s incredibly easy to max out all of your credit cards. When a financial crisis arises unexpectedly, credit cards are the easiest place to find needed funds. Although the initial crisis disappears, the debt does not.

Credit card dependence grows as quickly as the rising monthly payments. Victims of this monetary trap find their credit cards over the limit and payment amounts straining an already taxed budget. If your credit cards have reached their limit, it's time to take emergency steps to regain control of your spending and debt load.

Warning Sign #2 - Paying Only the Minimum

Just as cash-strapped consumers look to credit cards for additional funds, cash strapped budgets scan credit card bills for minimum payment amounts. It is very tempting to balance your budget by paying the minimum due on your credit card balances. Don’t give in to temptation.

Credit card users who pay the minimum monthly balance can end up paying hundreds of dollars in interest. As an example, a credit card user with a $3,000 balance at 17% interest, making a minimum monthly payment of $25, would need 126 months to pay off their debt. And the interest cost? A whopping $2,240.

Warning Sign #3 - Paying for Credit with Credit

Paying your credit card bills with money from another card is a classic sign of serious budgetary problems. The same goes for paying for groceries and other expenses such as gasoline or dues. Many pay for these items as part of an overall plan to earn perks and manage cash flow. It's a sign of serious trouble if the only way you can afford these basic necessities is to put them on your card.

Warning Sign #4 - Collection Phone Calls and Notes

If the first three warning signs didn't grab your attention, it's certain that this fourth warning sign will. Creditors begin calling when card limits are exceeded and payments are late. At first, these calls may be gentle reminders, but it doesn't take long for the gloves to come off.

Credit card companies also send out notices, reminding card users that a payment is late or spending has reached the upward limit. If you find yourself stuffing unopened mail from your creditors into drawers or, worse, the trash, it's time to take steps to regain control of your finances.

Fixing Your Finances

If your budget is exhibiting any of the symptoms of credit card over-extension, act now to bring things back in control. With a bit of planning and some good, old-fashioned monetary discipline you can move your budget back into the black.

Start with these simple steps:

  • Stop using your credit cards now.
  • Do not apply for new credit cards.
  • Draft a better, leaner budget that allows for debt reduction.
  • Pay off your smallest credit card balance.

Looking to Your Financial Future

You can avoid future credit calamities by becoming financially prepared. Set aside a few dollars each month, building an emergency fund. Instead of using credit cards, plan and save for items you want.

Act now and head off credit card trouble if any of these warning signs are present in your life. Early action means peace of mind and money saved.

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Please note your financial situation is unique and our tips & advice presented here may not be appropriate for your situation. CreditCardXpo.com recommends that you seek different advice & opinions from your own accountant or financial adviser who understands your individual circumstances before making any important decisions or implementing any financial strategy.