If you know your spending needs to change but you don’t know where to start, take a look at how you’re using credit and debit cards. One may be hurting your progress more than the other.

To Your Credit

Credit Cards offer a short-term solution to many problems, and when used well, can even put you at a financial advantage in the future. All too often though, credit card use causes harm to cardholders in the long run. Here’s how.

When you pay for purchases or living expenses with a credit card, a liberating sense of freedom may accompany the transaction, making the next purchase all the easier. Each month, the monthly payments on those credit cards come due, and at first, this monthly payment may be no big deal. But job loss, shopping addiction, unexpected medical bills or other factors may develop, making the monthly statement less welcome. Fear, stress or depression may accompany the statement.

When the balance becomes too much to pay, and the minimum amount due is unmanageable, it’s time to recognize there’s a problem, and get help. The reason? Depression leads to debt, not the other way around, according to Chicago bankruptcy and foreclosure lawyer David Leibowitz. So once the credit card debt grows bigger than your ability to pay, the discouragement experienced actually drives you to spend more, digging in further.

Debit Cards – The Other Option

Considering the potential pitfalls of credit card use, debit cards may seem like the answer. After all, with a debit card, you won’t be able to overspend, right?

Wrong. Unfortunately, swiping that card may be all too easy, especially when the transaction is temporarily successful. Too often, people use debit cards when funds are low, not knowing they’re nearing their zero balance. Then, a notice arrives—either by mail, email or text – telling them they’re overdrawn and there’s a price to pay

There’s no feeling like it. After all, with credit cards you’re aware of the interest rate— an overdraft fee, on the other hand, can be a startling blow. Even if your bank offers overdraft protection, it’s not free—you’ll likely be paying a monthly amount for that, too.

Further, a debit card can give you a false sense of security. It’s shocking to see “service fee” on a service you thought was simply a plastic check. Some banking institutions hit you with a fee before you even overdraw the account so be sure yours is one that doesn’t have a minimum balance requirement.

Turning it Around

The good news is that both credit and debit cards are tools. And like any tool, skills can be developed to use them. You wouldn’t hand a hammer to a young child, for example, but that same tool in the hands of a master carpenter can build a functional, even beautiful, structure. In the same way, credit and debit cards can be the source of goodness when paired with a trained consumer. A debit card, when used properly, can be a straightforward way to manage your cash in real-time. And a credit card, when watched meticulously, can build a credit score that someday gets you a dream car, home or even a better job.

You may benefit more from nixing your credit card spending, or getting rid of the debit card holding you down. Or, both may be useful, with a few money management skills.

Start gaining the skills it takes to turn these potential hazards into efficacious tools. See how you can turn your debt situation around with CESI, today.

Image Source: Flickr

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