Credit Card Trap - Case Study of Gradual Financial Fall

Emma, a young accountant considered herself not only successful, but also financially responsible. With stable job, good salary, and bright future ahead, she felt the whole world was at her feet.

Innocent Beginnings

Her journey begins innocently enough. She applied for her first credit card to build her credit history and enjoy the convenience of cashless transactions. She obviously paid off her balance in full each month, avoiding interest charges.

The Honey Moon

As her credit history was build, bank recognized her as premium customer, and increased her credit limit significantly. While she didn’t realize, but month by month, became easier and easier. With golden card, old limitations were left behind. Both financial, and what’s more important – emotional. The same time, she got salary increase, so she really felt she could afford anything.

Yes, she was buying more than ever before, yes, she was using credit card for that, but she was paying it full each month, so there surely was no problem.

The Initial Temptation

Yet with better life, her habits changed. And when another bank contacted her with an offer of a new credit card with even higher limit – she accepted. She then started using her card for everyday purchases.

This behavior is a common trap. Studies by the National Foundation for Credit Counseling show 77% of millennials with credit card debt admit to using it for everyday purchases.

A spontaneous weekend getaway or a trendy wardrobe upgrade became routine expenses charged to her credit card. With new, better apartment, better car, and lots of premium services, she somehow stopped paying pull amount each month.

The Slippery Slope

As Emma’s reliance on her credit card grew, so did her debt. She found herself carrying a balance more frequently, succumbing to the allure of minimum payments neglecting the snowball effect of interest.

Despite her minimum payments, her debt was accumulating. She started using one card to pay another. Monthly statements became a source of anxiety rather than a simple financial update.

The Sad Ending

As a result of delays in her debt payment, Emma’s credit score was affected, and she had to postpone her plans for a home purchase. Yet Emma's her Credit Card Trap impacted not only her financial well-being. She lost her optimism, and joyful attitude, become anxious and self-aware.

Conclusion

Emma doesn’t exist, but thousands of people just like her do, and struggle with Credit Card Trap. Getting out of it is hard, but possible. If you feel, you can be influenced, consider these few action items for start:

• Start tracking income and all expenses, even something as simple as typing them to an excel file can help you regain control over your life
• Especially analyze your expenses, look at your bank statements to check if there are some forgotten subscription services that you don’t use any more, or unnecessary spendings. You can use bank statement converter to convert PDF statement into more handy CSV file.
• Beware of Minimum Payments – they are designed to keep you in debt longer. Prioritize paying down your balance as quickly as possible.
• Consider consolidating your debts into one with a lower interest.
• Seek professional financial advice if needed to develop a sustainable repayment plan.