Credit card debt can feel like it’s burying you. A big payment here and there or a bout of bad luck and all of a sudden you’re drowning in it. Freeing yourself from credit card debt can be as simple as just retraining your mind to be more money-conscious. Here are three ways to change your thinking and use credit more responsibly.
- Tackle the easy stuff first. Start with small steps that will make a big impact. One study found that many borrowers could have avoided credit card interest and overdraft and late fees by switching from high interest to low interest cards or repaying their balance with checking account funds or a different card with a big enough limit. You could also use the “snowballing” method where you pay off the card with the lowest balance first and then move upwards. Others choose to devote their attention to the card with the highest interest rate first.
- Raise your credit limit. Yes, we know it sounds counter intuitive, but many borrowers feed into what Keith Wilcox, a professor of marketing at Columbia University, calls the “what the hell” effect. When they go overboard with spending one month they tend to assume they have already done damage so what’s the harm in racking up a few more charges. Increasing your credit limit can actually make what you owe feel more manageable because owing $500 on a $5000 limit is a lot less stressful than owing the same amount on a $1000 limit.
- Marie Kondo your spending. When you get a one time bonus or have a great day at work, are you more likely to treat yourself to a new pair of shoes or an expensive meal? Studies have found that when we’re feeling happy or lucky, we are more likely to spend on unnecessary luxuries. It sounds harsh, but consider taking one month to spend only on the necessities. You’ll not only save money but when you reintroduce treats like movie tickets or a new shirt, they will feel all the more exciting.
Credit card debt has a big mental component. The way we think about our spending and interact with it on a psychological level impacts how much we actually spend. If you’re struggling to get on top of your credit card debt, consider using one or more of these techniques to rewire how your brain thinks about spending.