Warning signs that credit card spending is out of control

Credit cards are a very useful financial instrument if used wisely and well.  Due to the high interest rate it can be very expensive to let credit cards go out of control.  It can also hurt a person’s credit rating.  There are a number of ways of knowing when credit card spending is out of control.

One of the first signs of trouble with a credit card is if there is trouble paying the minimum balance.  The minimum balance should always be a comfortable figure, and in almost all cases a borrower should be paying substantially more than the minimum balance off each month – even if this is concentrated on one debt.  If it is hard to meet the minimum balance then there is a problem.  If it is hard to pay double the minimum balance in most months then this is an early warning sign that there could be trouble, particularly if circumstances quickly change.

Another sign of trouble with credit cards is if the borrower starts missing payments.  It can be argued that payments may be missed not because they can’t be afforded but because the borrower is disorganized, and this is a more likely reason for missing payments.  However this is a warning sign for two reasons.  Firstly it shows that there may be more credit cards than the creditor can comfortably deal with.  Secondly it shows that there is a general lack of concern over the debts being built up, and a lack of attention to these debts.  While it may be admirable for a person not to worry about how much money they own, this is not the case when it comes to how much money they owe.

Another warning sign of out of control credit card spending is if there is a constantly growing balance.  Most credit card balances will be seasonal as a couple of large purchases are made in certain seasons, for example over Christmas or during a big lifestyle event, such as getting married or moving house.

Another warning sign is when there is no clear idea when the debt will be paid off.  Although minimum payments tend to be more than monthly interest, guaranteeing that the card will be paid off eventually if there is no more spending, this will take decades to pay off.  Borrowers should have an idea of when the credit card debt will be paid off.

If there is a problem with credit card spending it is vital that this is admitted, that there is constantly less spending than money earned and that a realistic plan is put in place to pay off the credit card debt.