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Myths - Cut Up Credit Cards to Avoid Spending

If you have high credit card debt, many financial advisors suggest cutting up your credit cards as a way to get out of debt.  Cutting up credit cards may be a step towards controlling spending, yet the credit card itself is not the fundamental problem.  The problem is the emotional issue behind the spending.  It is not the bar that creates an alcoholic, it is the emotional issue of wanting to drink.  Thus avoiding the bar (or cutting up the credit card) may be a step in the recovery plan, but it is not the entire solution.

"It's not what you are eating, but why you are overeating. Many people eat emotionally and use food as a source of comfort — which has nothing to do with hunger."
Dr. Phil

An important step in overcoming alcoholism is attending support groups or counseling to solve the underlying issue behind the drinking, the reasons for the addiction.  The same applies to credit card debt.  It is important to address the underlying emotional issues behind the spending.  The emotional issues of spending could stem from several sources including a lack of self-worth or a sense of shame, but do not believe that the credit cards themselves are the source of the debt. If you do, once the credit cards are cut up, the underlying issue will show up in a different form. 

Using credit cards can actually have benefits, if used correctly.  Recently, credit card companies have increased their cash back rewards for their cards.  So, if you are going to make a purchase anyway and can pay off the credit card right away, why shouldn't you take advantage of these rewards?  CitiBank offers one card that gives you 1% cash back on all purchases with 5% cash back on purchases at gas stations, grocery stores, and drug stores.  Fidelity & MBNA offer a 529 plan credit card which contributes 2% of all purchases to your 529 plan.  With gas being over $2 a gallon, the CitiBank card would give you back 10 cents or more per gallon of gas.  Wouldn't you go to a gas station that was 10 cents per gallon cheaper?  For my wedding, I put most of my vendor bills on credit cards.  Why should I pass up $100+ in cash by using my credit cards for the $10,000 for vendor bills? 

There have been studies that show people spend more when they have a credit card than if they only have cash.  There are usually two reasons that are linked with this difference in spending.  First, by only using cash and having a limited amount of cash on hand, spending will be limited.  Second, some say that spending on credit cards does not seem as real because the effects of paying the bill is delayed until later.  So, cutting up credit cards and using cash only will impact your spending by making it more real.  This does address the cause and effect of spending.  However, there are other ways to obtain the same results.  One way is to follow a budget and hold yourself accountable to the budget.  Let's say that you have $100 to spend on an evening out once a month.  If the total is $100 before you get dessert, you know that you have a choice to make.  Spend another $10 to $20 on dessert and cut spending elsewhere or just say no to dessert.  Unfortunately, many people just say charge it and do not hold themselves accountable to their budget.  However, being accountable to a budget makes spending just as real as spending cash.   A budget fails when you set it up and let it collect dust in a drawer.  A budget needs to be a part of every buying decision and reviewed to make sure you are adhering to it.  So, concentrate on the route cause of your spending (being accountable) rather than the symptom (credit card debt).  You may want to cut up the credit cards (or at least put them away) as you are solving your addiction, just as an alcoholic should avoid the bars.  Yet, do not think cutting up the credit cards will solve your problems.

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