Ways to Break the Cycle of Reaching Your Credit Card Limits
In a candid account, Taylor Gothard shares their experience of battling credit card debt that once reached a staggering $100,000 spread over 17 maxed-out cards. Five years ago, a job loss lasting six months forced Gothard and their spouse to rely heavily on credit cards to make ends meet.
According to Lindsay Bryan-Podvin, Cash App's financial therapist and founder of Mind Money Balance, there are common signs of individuals losing control of their credit card spending. These include actively avoiding banking or credit card statements, reflexively putting expenses on a card without considering affordability, playing a financial shell game with balance transfer or 0 percent interest rate cards, personal loans, and lying about the reality of credit card debt to others.
Struggling with maxed-out credit cards can be a result of various factors. Emergency and unexpected expenses, such as medical bills, car repairs, or home repairs, often exceed available savings, compelling people to rely on credit cards. Routine costs like groceries, childcare, and utilities that outpace income or savings also contribute to accumulated debt. Major life transitions and financial instability, such as divorce or job loss, frequently compel individuals to use credit cards as a lifeline.
Emotional stress and misunderstanding about credit cards can also lead to overspending or reliance on credit without fully understanding how interest and credit limits work. High medical costs and other structural financial problems further contribute to maxed-out cards. Lastly, lifestyle inflation, where higher earners increase spending proportionally with income, can lead to credit card debt despite high salaries.
Shame and denial are common emotions experienced by those who max out their credit cards. Gothard chose to seek help from a nonprofit debt counseling agency, Money Management International (MMI), to pay back their ballooning debt. Today, Gothard and their spouse have a curated set of six credit cards and approach maximizing travel rewards in a healthier way.
While strategies for tackling credit card debt may vary, some possible options include the snowball or avalanche debt payoff methods, getting a part-time job or side hustle, debt consolidation loan, debt settlement, creating a debt management plan with a nonprofit credit counseling organization, negotiating with card issuers, seeking help from a financial therapist, and considering Chapter 7 or Chapter 13 bankruptcy.
It's important to note that nearly 2 in 5 Americans in a relationship have kept a financial secret from their partner. Nearly 40% of cardholders have maxed out a credit card or come close in the last few years, according to a Credit Utilization Survey.
In conclusion, managing credit card debt requires honesty about one's financial standing, tracking spending, and creating a budget. Understanding the common causes and factors contributing to credit card debt can help individuals take control of their finances and break free from the persistent debt cycle.
A professional, Lindsay Bryan-Podvin, has identified signs of individuals losing control of their credit card spending, such as avoiding banking or credit card statements, reflexively putting expenses on a card without considering affordability, playing a financial shell game with balance transfer or 0 percent interest rate cards, personal loans, and lying about the reality of credit card debt to others.
Struggling with maxed-out credit cards can be a result of various factors including accumulated debt from routine costs like groceries, childcare, and utilities that outpace income or savings, emergency and unexpected expenses, major life transitions and financial instability, emotional stress and misunderstanding about credit cards, and lifestyle inflation despite high salaries.
