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Deep in credit card dues? Here are nine tactics to break bad debt cycles

While credit cards aren’t ideal for everyone, they can make your credit journey easier if used responsibly. When reconciling credit cards, you need a personalized no-debt plan.

Here are nine strategies to consider that can be used as tactics to break cycles of credit card debt.

1. Think about your spending habits

Maybe you’ve given up on debt, but history can repeat itself if you don’t unpack the motivations behind it. A deleveraging plan that works in the short term may not be viable in the long term if it doesn’t align with your priorities, according to Julia Kramer, a US-based financial behavior and leadership consultant.

Kramer suggested tracking trades dating back a week or more. Add a plus sign next to purchases you’re ready to repeat and a minus sign next to those you’re not ready to repeat. For mandatory purchases like fuel and groceries, add an equals sign. Note the date, item purchased, amount, and need the purchase met.

2. Use tricks to avoid spending

Those frequent coffees or meals with friends may be more about the personal connection experienced, or something else, as opposed to the gratification the article provides, according to Kramer.

This information is essential for identifying areas of your budget that are negotiable. For example, you may be more inclined to choose economy foods in order to meet a need rather than a want, Kramer added.

If your spending goes astray through feelings like anxiety or boredom, make a plan for those occasions. This may mean budgeting extra money or using tricks like using a credit card lock feature to avoid spending.

While credit cards aren’t ideal for everyone, they can make your credit journey easier if used responsibly.

3. Use cash for certain categories

If you want to reduce your expenses in categories such as restaurants or entertainment, for example, put some money aside to stay within your budget.

Cash on hand can lead to more conscious spending, according to Kramer. Having cash on hand not only reduces financial stress and anxiety, but also saves you unnecessary late fees for paying the bill on time.

4. Track cash flow, set up expense alerts

Create a tracking system that works for you. Setting up spend alerts on a credit card account can notify you if purchases exceed a certain amount. Tracking expenses with a spreadsheet, bullet journal, or budgeting app, for example, can also help with mental accounting.

“I wouldn’t open credit cards if you didn’t have a system to track expenses each month,” Kramer added. “It has to be something you enjoy and you know you’re going to do.

For Bell, a cash envelope tracking system helps it manage its expenses in different categories, including paying its credit card bill.

“When you look in a cash envelope and see that you only have a little bit of money left, it’s very clear that once that money runs out, there’s nothing else I can do,” she says.

5. Use credit cards only for planned purchases

Easily switch back to credit cards with small, planned purchases, such as a subscription service payment.

After paying off its debt, Bell only uses credit cards for purchases within the budget, and it pays them off in full each month to avoid interest charges. At first, she left her credit card at home to avoid using it.

6. Have an emergency fund to lean on

An emergency fund of even $500 (around Dh2,000) for a car or house repair can avoid your credit card debt.

Start small and aim to eventually cast a larger safety net over time – ideally three to six months of living expenses stashed in a high-yield savings account.

If you’ve already gotten used to budgeting a certain amount each month to pay creditors, keep it up, but direct the funds to savings instead.

Credit card

Convenient payment options can sometimes lead to insane spending, so be sure to be on the lookout for those slippery slopes.

7. Don’t Store Credit Card Information on Sites or Apps

Convenient payment options can sometimes lead to insane spending, so be sure to be on the lookout for those slippery slopes.

By entering payment information into the forms for every online purchase, you’ll have more time to think about a purchase.

8. Get advice on staying out of debt

A trusted partner can offer their opinion on a purchase or a debt-free plan. A responsible partner can be a sounding board that allows you to listen aloud to your own rationales for financial decisions.

Simply put, an accountability partner is someone who is willing to cheer you on and make sure you stay on track to achieve your goals. Everyone’s budget is different because everyone is different. But more often than not, we all need a responsible partner.

9. Update your debt strategy

As motivations and priorities change, your debt-free plan should follow. Continue to review credit card statements to identify which needs are being met by purchases and which are most important.

If during this process you continue to have frequent debt problems, consider closing credit card accounts, even though this can negatively impact credit scores.

“A big thing about it is knowing yourself and knowing what your areas of challenge are and finding ways around them,” Bell said. “Five years from now it might look different, but right now it’s what works.”