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Disadvantages of Having a Credit Card and other Debts

Disadvantages of Having a Credit Card and other Debts

My father received his pay in a semi-transparent pay pouch. Banks were for the “people in high places” and my parents saved by bringing money to the post office, where the dimes and quarters were written by hand in a booklet.

Fortunately, a lot has changed since then. Almost everyone has a bank account, even more than one. Taking care of money matters has become very easy. However, the downside is that it is also easy to go into debt.

This article is about the disadvantages of having a credit card and other debts. After all, most homeowners have a mortgage. A car is easily leased or paid for with consumer credit. A credit card makes buying on installment obvious.

Status is a pitfall

Having a credit card

For a while, I wanted to be a “real” businesswoman. Complete with suits and expensive dinners. Aka STATUS. Being sensitive to status is one of the biggest pitfalls that can quickly put you in debt.

This status also included a credit card. To me, that was something “typically American”. At that time it was less common in the Netherlands to have a credit card. All the more because our banking system had an easy way to pay with a normal bank card.

Had I looked into the conditions? Barely. Did I know how much interest I paid on my purchases? No. Fortunately, the only thing I did right was to repay the entire loan amount every month. And that was mainly because I didn’t even know that I could pay in installments.

Compare the credit rates

The best advice for getting out of debt is, of course, not to borrow money. But if that is not possible for whatever reason, compare different options. Do not immediately work with the person who shouts the loudest to have the best conditions. Request offers from various companies.

“One of the first steps in climbing out of debt is to give yourself a way not to go further into debt,” ~Liz Weston.

Mortgage interest

Mortgage debt

When we bought our first house, the mortgage interest rate was 11%. Everyone assured us that it was beneficial to choose a contract period of 1 year because the interest rates would surely go down. The following year it was 13,5%!

Fortunately, we were able to get through that year, although it was difficult, and then we were able to choose 7,8% for 5 years.

With that experience in our memory, we were inclined to always choose a period of 5 years. But when interest rates started to fall very sharply, we took the (calculated) risk of opting for periods of 1 year. We used the money we saved to make additional repayments.

Every tax expert said it was unfavorable to pay off. In the Netherlands, there was a great tax advantage on mortgages. That advantage will disappear. Some forms of mortgages are not allowed anymore because they entail too many disadvantages.

Get yourself well-informed, and make sure you make the decisions with your own benefit in mind. Be healthily suspicious of advice. Some advisers genuinely want to help you, others will benefit themselves if you choose their proposal.

Related: Do Women love Money? Or do we have a Love-Hate Relationship with Money?

Other forms of debt accrual

When we were young Tom and I bought our cars on credit. We were smart enough not to borrow money to go on a holiday, although we did have a bank account with revolving credit which we used.

Revolving credit was a big pitfall for us. We hardly noticed it was there, so we didn’t bother to look at our bank account at the end of the month. At the moment we have accounts on which we are not allowed to have a negative balance. It forces us to know when the automatic payments are due and to check the balance.

Related: How to Build an Emergency Fund? Do you Need it as a Pensioner?

The disadvantages of having a credit card

the disadvantages of having a credit card

Credit cards can prove to be invaluable when it comes to emergency funding. They are used by millions of people and are fairly easy to obtain. However, as useful as they can be, they can also potentially get you into further financial difficulties. This is especially true if you don’t use them correctly.

When your bank gives you the choice between a debit or a credit card then a debit card is always the best option. The difference is that a purchase with a debit card is immediately withdrawn from your bank account, so you have a better overview of your expenses.

Here are some credit card mistakes you can avoid.

Paying back the minimum each month

Credit cards have the option to pay back the minimum each month. This is often an affordable payment that can be easy to manage. However, you shouldn’t be paying just the minimum every month.

The trouble with only paying the minimum amount every month is that you’ll often only be paying the interest. This means the balance will either never go down, or it will go down extremely slowly. So, whenever you can it’s better to pay more than the minimum payment each month.

Making late payments

If you miss payments on your credit card, it can have a significantly negative impact on your credit rating. You’ll also be hit with late payment fees which can get you into further financial difficulties.

To avoid making late payments, ensure you have enough to cover at least the minimum payment amount. You should also open all of your credit statements, so you know when the payment is due.

Not understanding the fees involved

shopping spree

A lot of people have no idea about the fees associated with their credit cards. Some charge a monthly fee just for being able to use them, while others charge high fees for cash advances.

Ideally, you’ll look at the fees before you use a credit card. You’ll find them in the small print before you agree to accept a card. If you’re paying a lot in hidden fees and charges, consider switching to a lower-cost card.

Maxing out your spending limit

It’s a common misconception that keeping a balance on your card will improve your credit rating. The truth is, the more credit you use, the worse it’s going to affect your credit rating. This means that if you’re maxing out your spending limit, it’s going to be having a negative impact on your finances.

Try to use just a small portion of your credit card balance to avoid this becoming a problem.

Using too many credit cards

Finally, problems can arise when you’re using too many credit cards. Initially, it can be reassuring knowing you have multiple lines of credit you can turn to if needed. However, if you use more than one credit card, your spending can easily spiral out of control. It can be difficult keeping up with multiple card payments too, so always just use one card.

Credit cards can be useful if they are used correctly. Be sure to avoid the common mistakes mentioned above if you don’t want to get into unmanageable debt.

Switch to cash

If you tried getting out of debt and have a really hard time with it, try switching to cash payments only. Calculate your budget each month and divide it over the coming weeks. Withdraw only the money you will need in a week.


Don’t be ashamed to ask for help

Lots of people are secretly in financial trouble. But why would it be a shame if you have problems? We all have our strengths and weaknesses. And if money management is one of your weaknesses, it’s better to ask for help.

Debt counseling

If you have friends that are good with handling money, ask them for advice. If you haven’t or if you don’t want to bother your friends, look for a bureau that can assist you. Many countries have a social service where you can ask questions.

Additional tips to get out of debt

  • Make a budget. Calculate your figures and budget your expenses;
  • Way of thinking. Your unconscious thoughts are more influential than you think. Try to figure out your money mindset;
  • Have fun paying off. Make it a game to pay off as much of your debt as possible every month;
  • Try to make extra money. We earn extra money with affiliate marketing and are very enthusiastic about the network we are a member of;
  • Log your progress. Keep track of your accomplishments in a journal, as text or image.

Related: Poor Mindset vs Rich Mindset – How to Grow the Right Money Mindset

I am not a financial expert nor do I give financial advice. The information I share here is based on my own experiences. The regulations are different in every country, make sure you know the rules that apply in your country.

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4 thoughts on “Disadvantages of Having a Credit Card and other Debts”

  1. May I ask you for a tip. I’m trying to save some money because houses here in Dubrovnik are extremely expensive.. So, I’m trying to save some money. I always like to have some cash with me, but I realized that whenever I do have cash in my wallet, I’m more likely to spend it very quickly. Like you said, should I make a weekly budget, and make sure never to exceed it or?

    • Hi Petar, My mother always used to say that I have a hole in my hand. Meaning I couldn’t keep money in my pockets either when I was young. You’ll have to try different things to find out what works best for you.

      First of all, I definitely should make a weekly budget, and maybe even a daily budget, if I were you. When we left the Netherlands to travel around Spain, we didn’t have an income. We knew we had to live off our savings and reserve a sum for a house. So I had calculated how much we were allowed to spend each day and had made a spreadsheet to evaluate every day whether we didn’t spend too much.

      Either you reserve your budget in cash. When it’s gone, it’s gone, and you shouldn’t allow yourself to draw new cash from the ATM.
      Or you force yourself to only pay with your bank card. But this requires more discipline because a card is easily taken in the hand, isn’t it?

      If you want to save money, I would send it to a different account as soon as you are paid. Calculate what you can afford each month and make it a direct debit. And regularly heighten that amount with small steps. Once you see your savings account grow you’ll be all the more motivated to add to it.

      And what I definitely would recommend doing is looking at houses you would like to live in, make a picture of some, and glue them somewhere you can see it every day. It will remind you of your goal and motivate you.

      Although my articles are aimed at my peers, many of them are worth reading at any age, so have a look here. Good luck 🙂

  2. Hi Hannie, did you know there is a solution in between cash and creditcards available? Apart from my credit cards, that I pay off in full each month, I have some VISA debitcards, that cost nothing and one of the two even gives me cashback.

    • Hi Kadanza, thanks for your remark. I have a remark about debit cards in my article but you are right – it is a bit hidden.

      I don’t have a credit card anymore and my Spanish bank gave me a Visa debit card. It is indeed ideal. Luckily both my husband and I have our own debit card because his card was stolen last summer and we didn’t have to interrupt our holiday because of my card. 😀

      Great that you even get a cashback. Thanks and take care.


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