When your finances start to spiral and it becomes increasingly difficult to keep up with credit card payments or build towards financial goals, switching your payment method temporarily to cash or a debit card could help.
Spending with credit cards can stimulate the brain’s reward centre and drive you to make more purchases, according to a study by MIT Sloan School of Management. The 2021 study had a small sample size of 28 participants but other research also finds that people are likely to spend more with credit cards.
However, it is possible to avoid overspending and reduce the cost of interest charges on outstanding debt by using cash instead.
Taking a break from credit card spending is not for everyone, though. If you want to preserve your credit scores, you will still need to keep zero-balance credit cards open and active, with small recurring purchases such as paying for streaming service subscriptions or other similar transactions.
Issuers may close inactive accounts, which can cause credit scores to drop.
By not piling new purchases on your credit cards, making more progress on debt or savings is possible.
If you need a sign to determine if this course is right for you, here are some instances when shifting your spending to cash or debit can make sense.
1. You frequently overspend in certain categories
You might not need to go cold turkey on your credit card spending. If you tend to overspend only in specific categories, consider setting aside a fixed amount of cash or funds on your debit card to cover those expenses.
For those purchases that do not lead your budget astray, continue using a credit card and paying it off in full every month to avoid interest charges.
If, however, you usually overspend across several categories, using only cash may help you stay on track.
2. You are an emotional or impulsive spender
You may not be aware that you are an emotional or impulsive spender. However, it is possible to get an idea by reviewing credit card statements and reflecting on the reasons behind the purchases, says LaQueshia Clemons, a financial therapist at Freedom Life Therapy and Wellness in Connecticut.
“When you get upset or whenever you’re emotional, this may be when you find yourself on Amazon or going to the mall,” Ms Clemons says.
“As a way to avoid negative feelings, you may find yourself buying items because this can give you a euphoric feeling to replace the negative emotions.”
If you realise you might be in this category after reviewing your purchases, stop spending with credit cards and analyse your financial habits, she says.
You might also consider meeting with a financial therapist if it is difficult to accomplish financial goals or you are in a continuous cycle of debt.
3. You can’t see a way out of debt
If your credit cards are maxed out or you are struggling to keep up with minimum payments, it is time to come up with a strategy to pay off the debt.
After several layoffs early in her career, Aileen Luib, a digital content creator based in California, says she had to rely on credit cards to get by.
Her combined balances grew to $10,000 by 2015, putting a wrench in her plans, so she came up with a new one.
“I was doing a lot of different things to rack in the money and chip away at that debt as quickly as I could,” Ms Luib says.
“I was kind of tapping into my skill sets to start scraping up money in little corners of my life, and it all added up.”
Ms Luib says she also used a balance transfer to consolidate debt from several credit cards on to one with a lower interest rate, and she did not add new purchases to the card.
With these tactics, she says she paid off her balance in 2017.
Balance transfers typically require a good credit score. The ideal balance transfer card will have an interest-free window long enough to pay off debt, no annual fee and a balance transfer fee of 3 per cent or lower.
To determine if a transfer is worth it, consider whether the balance transfer fee costs less than what you are projected to pay in interest charges on the current credit card. (An online interest calculator can help.)
You will also make more progress on the debt if you stop putting new purchases on credit cards.
THE%20HOLDOVERS
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UAE currency: the story behind the money in your pockets
The biog
Hobby: Playing piano and drawing patterns
Best book: Awaken the Giant Within by Tony Robbins
Food of choice: Sushi
Favourite colour: Orange
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
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Places to go for free coffee
- Cherish Cafe Dubai, Dubai Investment Park, are giving away free coffees all day.
- La Terrace, Four Points by Sheraton Bur Dubai, are serving their first 50 guests one coffee and four bite-sized cakes
- Wild & The Moon will be giving away a free espresso with every purchase on International Coffee Day
- Orange Wheels welcome parents are to sit, relax and enjoy goodies at ‘Café O’ along with a free coffee
Tree of Hell
Starring: Raed Zeno, Hadi Awada, Dr Mohammad Abdalla
Director: Raed Zeno
Rating: 4/5
More on Quran memorisation:
Another way to earn air miles
In addition to the Emirates and Etihad programmes, there is the Air Miles Middle East card, which offers members the ability to choose any airline, has no black-out dates and no restrictions on seat availability. Air Miles is linked up to HSBC credit cards and can also be earned through retail partners such as Spinneys, Sharaf DG and The Toy Store.
An Emirates Dubai-London round-trip ticket costs 180,000 miles on the Air Miles website. But customers earn these ‘miles’ at a much faster rate than airline miles. Adidas offers two air miles per Dh1 spent. Air Miles has partnerships with websites as well, so booking.com and agoda.com offer three miles per Dh1 spent.
“If you use your HSBC credit card when shopping at our partners, you are able to earn Air Miles twice which will mean you can get that flight reward faster and for less spend,” says Paul Lacey, the managing director for Europe, Middle East and India for Aimia, which owns and operates Air Miles Middle East.
Brief scores:
Toss: Sindhis, elected to field first
Pakhtoons 137-6 (10 ov)
Fletcher 68 not out; Cutting 2-14
Sindhis 129-8 (10 ov)
Perera 47; Sohail 2-18
Founders: Ines Mena, Claudia Ribas, Simona Agolini, Nourhan Hassan and Therese Hundt
Date started: January 2017, app launched November 2017
Based: Dubai, UAE
Sector: Private/Retail/Leisure
Number of Employees: 18 employees, including full-time and flexible workers
Funding stage and size: Seed round completed Q4 2019 - $1m raised
Funders: Oman Technology Fund, 500 Startups, Vision Ventures, Seedstars, Mindshift Capital, Delta Partners Ventures, with support from the OQAL Angel Investor Network and UAE Business Angels
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COMPANY%20PROFILE
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BRIEF SCORES:
Toss: Nepal, chose to field
UAE 153-6: Shaiman (59), Usman (30); Regmi 2-23
Nepal 132-7: Jora 53 not out; Zahoor 2-17
Result: UAE won by 21 runs
Series: UAE lead 1-0
COMPANY%20PROFILE
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How much of your income do you need to save?
The more you save, the sooner you can retire. Tuan Phan, a board member of SimplyFI.com, says if you save just 5 per cent of your salary, you can expect to work for another 66 years before you are able to retire without too large a drop in income.
In other words, you will not save enough to retire comfortably. If you save 15 per cent, you can forward to another 43 working years. Up that to 40 per cent of your income, and your remaining working life drops to just 22 years. (see table)
Obviously, this is only a rough guide. How much you save will depend on variables, not least your salary and how much you already have in your pension pot. But it shows what you need to do to achieve financial independence.
'Saand Ki Aankh'
Produced by: Reliance Entertainment with Chalk and Cheese Films
Director: Tushar Hiranandani
Cast: Taapsee Pannu, Bhumi Pednekar, Prakash Jha, Vineet Singh
Rating: 3.5/5 stars
RESULT
West Brom 2 Liverpool 2
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Liverpool: Ings (4'), Salah (72')
Ferrari 12Cilindri specs
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