Recently, there was a great blog on Independent Fashion Bloggers in which the writer admitted that her addiction to buying fashionable clothing had gotten her into some serious financial difficulties. She spoke about how a purchase of concert tickets one day quickly led to additional purchases of expensive necklaces, tops and dinners out. In that short amount of time, she had spent away all of her progress towards paying down the thousands of dollars in credit card debt she had amassed.
Here at Golden State Partners, we hear from people who have binge-shopped their way into thousands of dollars in credit card debt. They are struggling to make the payments each month and wonder what they should do. The following are some suggestions.
Why Using the Plastic for Your Purchases is Bad
The Wall Street Journal reports that the current interest rate on credit cards is 17 percent. Americans are carrying over $8,000 on average of credit card debt as we head into a recession.
In the last recession, many people lost their jobs and could not pay their credit card debt. For those people, their credit was ruined, harming their ability to buy an automobile at a reasonable interest rate in the future and their ability to buy a home at all.
At these credit card interest rates, you are primarily paying the interest each month and not attacking the principle. Thus, the debt is not getting paid down, but the high-interest payments remain. According to CNBC, many of us are just one $400 emergency away from financial difficulties.
What to Do to Avoid Credit Card Debt
Create a Budget
You have to ensure that you have the basics met each month. Write down your monthly expenses and income sources. Do you have income left over at the end of each month? Do you have an emergency fund to cover car repairs and longer-term expenses?
If not, what is unnecessary that you can eliminate from your expenses that you really don’t need? How much will eliminating a daily latte or too many dinners out each week save you? Can you cancel the cable television and watch the media on the internet?
If you have to resort to buying fashions with your credit card and carrying a balance, you can quickly get into bad personal cash flow issues that could endanger your financial present and future.
Eliminate Triggers
Whether it is putting the credit cards in a drawer and not taking them with you and/or limiting the amount of time you spend shopping in stores or online, it is important to limit your ability to binge spend.
Seek Help
If you suffer from binge shopping, you may be able to conquer this addiction by talking to friends and family and getting their support. If that is not enough, consider seeking professional help from a counselor who is experienced in addiction.
Find More Budget-Friendly Fashion Choices
These days, there are quite a number of options for people who enjoy fashion but need to save money. Of course, there is Amazon. According to Harper’s Bazaar, there are also online consignment retailers who sell gently-used, designer fashions, such as The Real Real, Vestiaire Collective, LXRandCo, thredUP, and Le Prix.
Sell What You Are Tired Of
You can use the same list of online consignment retailers and sell the fashions that you no longer want? This can fund future purchases. Look for what you have not worn in the past year.
Purchase Only What You Can Pay in Full Each Billing Period
The Balance suggests that consumers try to solely purchase what they can pay in full at the end of the billing period, so they don’t carry a balance at all.
If You Already Have Heavy Credit Card Debt
If it is too late, and you are swimming in heavy credit card debt at high interest, you can apply for a zero-interest, balance transfer loan. Use this strategy only if you can pay off all of the debt within the introductory period that has no interest.
If you have more debt than you can pay off interest-free in a year or so, consider a debt consolidation loan. Debt consolidation loans usually have lower interest rates and allow you to pay off the former credit card debt in a few years. This will likely lower your monthly payment and give your budget a break.
If you choose either the balance transfer credit card option or the debt consolidation loan, you must be prepared to put the credit cards away and not use them unless you can pay the balance in full each month. Otherwise, you will over-extend yourself more. Consider joining a group that will help you if you are a binge shopper, so your debt consolidation efforts can succeed.
If you are struggling with high-interest credit card debt, call us at Golden State Partners. We have solutions to help consumers who are struggling with debt issues