Debt facts and myths: The truth about how debt adds up

Most debt is incurred with large purchases, like big televisions or extensive vacations, so if you just keep those big charges in check, you’ll be fine, right? Wrong. In fact, for many people, debt sneaks up after using credit cards for small purchases. Here are some debt facts and myths that will help you get your finances under control.

Consider these three credit myths and the solutions for taking charge of your charging:

Myth: You don’t need a budget if you pay attention.

How much do you really spend every day? Although the answer to that question will fluctuate based on various factors, you may be surprised to discover where your money goes.

Fact: Paying attention to what you charge on your credit card, and setting reasonable spending limits, will help you get your debt under control.

Myth: Nobody carries cash anymore.

Remember actual, paper money? Thanks to a culture that makes credit so easy, some people don’t even carry cash anymore. But relying on real money more often than credit helps you understand how you’re spending.

Fact: Using cash instead of a card can be a good option for people who have a difficult time keeping track of their spending. It’s easier to realize you’re running out of money to spend when you can actually see the dwindling stash of dollar bills.

Myth: Using a credit card is better than using a debit card.

If you can keep on top of your budgeting, use your debit card instead of your credit card so that any purchases come directly out of your account instead of adding to your debt load. Be sure to keep track of your account balance to avoid overdrawing your account.

Fact: If your main goal is to get your credit spending under control, using a debit card can be an excellent choice for daily purchases.

Take control

If you can’t pay your credit cards in full at the end of every billing cycle, take a moment to think about whether that purchase is worth the extra money you’ll be paying in interest fees. Once you can separate debt facts from myths, you’re in a good position to take control of your finances and avoid unnecessary debt down the road.

Want more strategies for handling debt and taking control of your finances? Click below to download Cobalt’s free e-book, The Debt Management Guide.