Everyone knows about the seven deadly sins — envy, gluttony, greed, lust, pride, sloth, and wrath. These vices have been used for centuries to educate others about the tendency humans have to sin. And let’s face it, when it comes to credit cards, some Americans can be accused of doing some major sinning.
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Used the wrong way, credit cards can be a major liability instead of a healthy way to build credit. Do you often find yourself swiping your plastic without thinking that you’ll have to eventually pay off those purchases? Are you apt to charge items on your credit card if you’re angry or feeling vengeful? Does greed make you want to whip out your Visa or MasterCard to pay for material possessions? These 7 deadly credit card sins will ruin you financially if you aren’t careful:
1. Envy — Maxing out your credit cards
Do you secretly desire your colleague’s new car or covet your friend’s job? An envious person desires other people’s traits, status or abilities — to their own detriment. A recent study found that witnessing friends’ vacations, love, and success on Facebook can cause envy, triggering feelings of misery and loneliness. Wishing to have what someone else has can cause you to develop ugly spending habits. Career, car, cash, gadget, house or any other type of envy might push you beyond your spending limits, especially if you’re using credit cards to pay for your envy-fueled purchases.
A recent survey of 1,000 renters between the ages of 18 and 24 by Rent.com found that more than three-quarters of renters spend more than they earn every month. And more than 20 percent overspent their income by more than $100. A 2009 Census report calculated that Americans spend $1.33 for every dollar earned. These overspending statistics likely mean that you’re using plastic to make your purchases. If you swipe more than you can pay off, you’re racking up debt needlessly. That could spell danger if you’re close to maxing out your credit cards. Pushing your plastic to the limit will sink your credit score, make new credit costly to find, and might lead to over-the-limit fees if you’re not careful.
How to stop sinning: Comparing yourself to other people is natural, but can be very unhealthy. Are you spending more just to keep up with the Joneses? Take a hard look at your budget. Where has your spending increased? And more importantly, why did it increase? If your spending increase was triggered by a desire to maintain a status — give it up. Your envy will leave you broke and in debt.
2. Gluttony — Getting more cards than you need
Do you have a desire to consume more than required? A gluttonous person overindulges. Whether that means swiping your plastic more than you should or applying for more cards than is needed — gluttony can be harmful to your financial health. If you consistently overindulge with your credit card, you will find yourself mired in debt and struggling to pay the interest on a card. If you carry about $15,000 in debt — near the average amount of debt per household — and only pay the minimum each month, you could end up paying $11,000 in total interest alone. You can figure out how long it make take you to pay off your credit card debt with an APR calculator. Carrying a high balance on your credit cards will hurt your overall creditworthiness because lenders might think you are at a high risk of defaulting.
If you demonstrate gluttony through applying for more credit cards than you need, you could seriously damage your credit score if you don’t handle your cards properly. If you apply for too many credit cards within a short period of time, multiple inquires will appear on your credit report. Also, lenders might view you as a risk because you appear desperate for credit.
How to stop sinning: Gluttony will only make your debt fatter. Here’s a rule to live by — if you can’t pay with cash, don’t buy. Also, stop the temptation to apply for credit cards by limiting the offers you receive in the mail.
3. Greed — Extending your credit card limit
Ever heard of the phrase less is more? If you’re a greedy person, you can’t even fathom the thought. You’re greedy because you want more and more and even more. Watch out. Your selfish desires for wealth or power will only leave you in a precarious position financially if you’re relying on credit cards to pay for what you want.
To a greedy person, a credit limit extension might seem like a godsend. But if you’re eligible for a credit limit increase — don’t do it! More credit is likely to lead to more debt. Increasing your credit limit is especially dangerous if you carry debt on your card each month. If you’re not financially able to pay off your credit card each month, what good will it do to increase your credit limit? If you’re offered an automatic increase by your card issuer, be sure to check whether there will be a hard inquiry on your credit. A hard inquiry — when a potential lender reviews your credit because you’ve applied for credit with them — will hurt your credit score.
How to stop sinning: Be honest with yourself if you’re thinking about getting a credit limit extension. Do you really need it or do you want it? In most instances, you don’t need it. Decline!
4. Lust — Applying for a credit card beyond your reach
Do you spend your time lusting after material items, power, or status? Do you have an insatiable desire to have the newest and best of every single thing? Your thirst to have it all will lead you down a long and arduous road if you aren’t careful with your credit cards.
Lusting over the biggest and brightest of everything means you will want the best credit cards and rewards too. Whether you’re after a card that offers great travel perks like bonus points to redeem for miles or want one of the world’s most exclusive credit cards — said to be the American Express Centurion or JP Morgan Chase Palladium — it will take more than your lust-worthy desires to get the plastic. Your credit score must be 720 or higher for these lust-worthy cards and the list of requirements to get one of the truly exclusive plastics is long and expensive.
How to stop sinning: Only apply for a credit card if you need one. Do some research before you apply for a credit card to see what your credit score will qualify you to get, which will improve your odds of getting approved.
5. Pride — Not getting help for your credit problems
Do you have a problem asking for help? Would you be more embarrassed to admit what your credit card debt is or your age? According to a recent poll by the National Foundation for Credit Counseling, more Americans are embarrassed to admit their large credit card debt than their age, weight, bank balance, or credit score. If your credit card debt is large enough to cause you embarrassment, it’s time to get help.
Sadly, many Americans have too much pride to seek for their problems with plastic. If you find yourself avoiding phone calls from debt collectors, worry about losing your home or car, or have trouble paying bills, you should know that you’re not alone. Don’t let your pride prevent you from getting the help you truly need.
How to stop sinning: Assess your financial situation. Contact your creditors if you are in a bind. Tell a trusted friend or family member about your situation so that they can help you develop a plan. Seek advice from a credit counseling organization. A credit counselor can advise you on managing your money and debts.
6. Sloth — Too lazy to protect your credit card
Do you shred your credit card statements? Open your bills promptly? Reconcile purchases you’ve made with what’s listed in your statement? These simple steps could save you a giant headache and prevent thieves from stealing your credit card data.
According to the Bureau of Justice Statistics, about 16.6 million Americans over the age of 16 were victims of identity theft in 2012. That’s about 7 percent of the population. The majority of those incidents (85 percent) involved misuse of existing bank and credit card accounts. Victims suffered more than $24.7 billion in direct and indirect losses — more than the combined $14 billion in losses from other types of theft, like burglary or property theft. On average, credit card fraud victims averaged direct losses of $1,003. While there’s no foolproof way to prevent a scam artist from committing credit card fraud, you can — and should — take steps to prevent them from causing you financial harm. Don’t let laziness stop you from protecting your finances.
How to stop sinning: Go through your monthly credit card statement line by line. Don’t give your account number to anyone on the phone unless it’s a reputable company. During a transaction, keep an eye on your card. Save your receipts and compare the totals with your statement. Report any questionable charges to your card issuer.
7. Wrath — Revenge spending
When you’ve had a bad day or gotten into a big fight with your significant other is your immediate reaction to swipe your credit card for some retail therapy? Emotional spending is real and lots of people do it. Whether you want to buy something because you’re angry or in a vengeful mood, this bad habit can quickly spiral out of control if you swipe your credit card carelessly because of your emotional state.
Emotional spending happens when you buy something you don’t need or sometimes even want. One common type of emotional spending occurs when you are in a relationship and have a fight. It can be tempting to splurge on big items for revenge, especially if there’s a shiny credit card in your wallet that you share jointly with a spouse. But be careful, you will be responsible for paying 50 percent of those purchases if it’s a jointly held card. And if worse comes to worse, your vengeful spouse could even file a lawsuit to get you to pay for the amount you charged. Emotional spending is a quick way to rack up debt without really making yourself feel better in the long run.
How to stop sinning: Ever heard of the phrase money doesn’t buy happiness? It also won’t help improve your mood if you’re feeling angry or vengeful. While avoiding emotional spending altogether may not be a realistic goal, you can take steps to prevent it from happening. Stop impulse buys, limit your temptations by avoiding the mall or browsing your favorite stores online, and find alternative activities to distract you from swiping your plastic.