The goal of many home budgets is the reduction of credit card spending to a level where the entire balance is paid each month and no interest is due. That goal is obtainable with hard work, attention to spending patterns, and a sufficient earnings-expense ratio. Excess credit card spending is an ongoing hazard to many people’s financial health.
The first step in reducing credit card spending is an evaluation of what goods or services are being purchased on credit. A consumer may choose to keep a register of credit card charges in exactly the same way as check registers are kept. Expenditures are entered as they occur, with notations giving the reason for the purchase as well as date and amount. Over time, patterns may emerge, although it may take several months for them to become apparent.
Many expenditures will be necessary and unavoidable. A few may be the result of impulse, moodiness, depression, or other comfort spending, and are easy targets in the quest to reduce credit card spending. The debtor, a harsh but accurate title, may recall not only the reason for the purchase but also his or her mood at the time. In reviewing the events prior to the purchase, the credit card holder may realize that certain triggers are associated with the transaction, such as anger, frustration, boredom, pain, or loneliness. Other triggers might be location, a particular time of day, or a certain activity.
Once the trigger is identified, it is disarmed by the conscious choice of a substitute behavior. While not in the purchasing environment, credit card holders should make plans for an alternate comfort activity, such as a walk, a phone call to a friend, or picking up a magazine. The response should be as satisfying and as opposite in nature to the essence of the avoided trigger setting as possible. Anticipation of the environments that breed unwanted credit card spending allows alternate choices to be made under pressure.
If impulse spending is not the problem, the credit card holder may wish to sort monthly expenditures into three columns labeled: Necessary, Nice to Have, and Very Nice to Have. Should Nice to Have expenditures dominate, the analyst reviews if any of the Very Nice to Haves are obtainable should the Nice to Haves be reduced by 50% to 75%. By keeping a list in a wallet of the Very Nice to Haves, the consumer is reminded of the real price paid for a Nice to Have item.
Sometimes, more extreme options may be necessary. Refusing to carry cards while away from home, cutting them up, or replacing them with debit cards can result in a decided reduction in credit card spending. Another technique is to put into cash the available funds that exceed monthly fixed expenses and use cash only when making impulse or Nice to Have purchases.
Reducing credit card spending is also possible by reducing total credit card debt. While implementing as many of the possibilities above as possible, the cardholder pays the minimum on all credit cards and the maximum available funds are paid on the card with the lowest balance until that card is paid off. Then that card’s minimum balance plus all available excess funds are applied to the next card with the lowest balance, until only one card has a balance and that balance is paid off monthly.
