4 Reasons to Kick the Credit Card Habit

There are lots of reasons not to carry credit card debt. The most obvious is that it’s really expensive. And here’s a reason often overlooked: It seems so much harder to work for money you’ve already spent.

But what if you do not carry any credit card debt at all? There are some who would say it is perfectly reasonable to use credit to pay for everything provided you are able to pay it back down to $0 during the grace period.

Sure, that makes for easy record-keeping plus all those points, miles, and cash rewards that many credit card issuers offer. Even so, it’s a habit that can have a negative effect on your financial situation.

You need to kick the credit card habit for these simple reasons:

Your credit score

The more you use your cards, the more likely you are to make a mistake. All activity—good or bad—is reported to the credit bureaus and lands in your credit file. That information is then compiled into a 3-digit number that can change daily—and be used to determine how much interest you will pay on your mortgage, what your insurance premiums will be, and even if you’ll get the apartment or job you’ve applied for.

Credit scores—like it or not—have become a kind of character reference. If your score could use a little help, kick the credit card habit and your credit score is likely to improve all on its own.

According to Credit Karma, “FICO® score ranges vary—they can range from 300 to 850 or 250 to 900, depending on the scoring model—but higher scores can indicate that you may be less risky to lenders [and others].”

To get a rough idea of your FICO credit score, you can use the FICO® Score Range FICO estimator. The calculator is free. Or, you can purchase your credit score from MyFICO.com. On the FICO score range, anything over 740 is good. Higher than 760 is great.

Your happiness

One study from the Institute for Research on Poverty and the Center for Financial Security at the University of Wisconsin-Madison shows that people with credit card debt and overdue bills are much more likely to experience symptoms of depression than those who don’t have such debts, particularly if they are near retirement, unmarried or less educated. The more short-term debt a person had, the more frequently they reported feeling those symptoms.

No surprises there. The effects of credit card debt can be debilitating, if not devastating. But the good news is that kicking the habit allows you to retrace your steps and work your way out of debt. Each repaid debt returns your options. And once out of out of debt, your peace of mind return will return as well. It’s not impossible.

In fact, thousands reading this right now have done that using the system I created and you can use, found in Chapter 7 of my book DebtProofLiving.com.

MORE: How to Break Bad Money Habits

Your cash

There are a number of impressive studies, such is “Always Leave Home Without It,” establishing the fact that people who pay with plastic just spend more—whether it’s a soda machine with a credit-card slot or a great sale at Target.

Kick the credit card habit, leave the plastic at home and you will spend less. That means more cash in your pocket.

Your shelter

It’s become the popular thing to tap into one’s home equity by way of HEL—a loan equity loan—or refinance to pay off credit card debt. But that’s just a way of moving that debt to one’s home. The homeowner-borrower puts his or her home at risk should something happen that makes it impossible to keep up with those new, big monthly payments.

Even worse perhaps, most people who pay off their credit cards turn around and run them back to the max within just two years, getting themselves into double trouble.

Kick the credit card habit, and you won’t be tempted to tap into this appreciating asset to pay for stuff you charged a long time ago, and possibly don’t even remember now.