5 Steps to Break a Credit Card Spending Habit

Quick Answer

Changing habits can be hard, but try these five steps if you want to curb your credit card spending:

  1. Identify the root cause of your spending
  2. Track your credit card spending
  3. Set small and manageable goals
  4. Stop using credit cards altogether
  5. Find like-minded groups and people
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Breaking a spending habit can be difficult, especially since the desire to spend is sometimes tied to deeply rooted psychological needs. Some people feel compelled to spend money because it gives them a rush, or because they tie their self-worth to their perceived wealth. Others may spend their money quickly to avoid accumulating too much wealth.

Adding a credit card to the mix can make spending even easier. Credit cards let you take on debt and separate the pleasure of a purchase from the pain of immediately paying for it. So, how do you break out of an overspending habit? Try starting with these five steps.

1. Try to Identify the Root Cause of Your Spending

Overspending with a credit card could broadly be defined as spending more than you can afford to pay off each month. It can become a problem because you'll generally have to pay interest on the portion of the balance you don't pay off each billing period. As your balance grows and gets carried from one month to the next, it can become more and more difficult to pay off.

If you're overspending on necessary purchases—food, utilities, insurance, medical bills and the like―then the core issue may be a lack of money rather than overzealous spending. You could try looking into ways to cut these core costs or increase your income to help balance your budget.

Overspending on discretionary (in other words, non-necessary) expenses is a different beast. If you're feeling compelled to use your credit card on purchases you couldn't afford otherwise, then you might need to dig a little deeper. Ask yourself what triggers your spending and whether you can replace a spending habit with a more productive one. For example, if you shop when you're feeling stressed, there may be a different stress-relief method that won't cost you any money.

There are workbooks and courses that can help you identify the root causes of your spending habits. You could also get professional insight by scheduling a one-on-one appointment with a debt counselor or financial therapist.

2. Track Your Credit Card Spending

You might already have a sense that you're overspending, but don't have a clear picture of exactly where your money is going. If that sounds right, you're not alone. Many people avoid examining potentially negative information too closely, but it's important to know where your money is going if your intention is to change your habits and measure your progress.

While making a complete budget with all your income and expenses is a good idea, you don't need to go that far at first. Instead, focus on tracking your credit card spending. You could do this manually by reviewing your credit card statements, or you could link your credit cards to a money management tool that can help you import and categorize the credit card transactions.

3. Set Small and Manageable Goals

Having clear goals can help you stay motivated if you want to break your credit card spending habits. Think about your big "whys"—why reducing credit card spending is important to you. Perhaps you want to pay off debt and feel more financially free. Or maybe you're saving up for a new car, home, your retirement or a child's college fund.

While keeping your long-term goals in mind, be sure to set yourself up for success with smaller, short-term financial goals. If you want to pay down some or all of your credit card debt over the next year, for example, figure out how much you'll need to decrease your spending each month, week or day to make that happen.

Focusing on short-term goals can earn you the satisfaction of more immediate wins and lets you course-correct as you go. Otherwise, you might wind up overspending at the beginning of the month and struggle to stay on track during the last few weeks.

4. Stop Using Credit Cards Altogether

If you want to take a cold-turkey approach, you could try to immediately stop using your credit cards for any new purchases. You might want to remove your credit card details from your online accounts and leave the physical cards at home to avoid temptation.

Due to the potential repercussions, however, canceling your cards altogether could be a bit extreme. Closing cards might hurt your credit scores, and having a card for emergencies or travel purchases could be helpful.

5. Find Like-Minded Groups and People

Some people overspend, in part, because they feel pressured by the purchases they see others make. For example, a new car in the neighbor's driveway might make you reconsider what you're driving. But just as keeping up with the Joneses can lead to overspending, surrounding yourself with people who want to pay off debt and build savings can help you reframe what success looks like.

You can look for online groups or forums focused on financial accountability and try to connect with family members, friends and colleagues who share similar saving or spending goals. Having an accountability buddy—someone you connect with more regularly to discuss finances—could also help you both stay on track.

How Overspending Could Impact Your Credit

While improving your credit score might not be your primary motivation for cutting back on credit card spending, it could be a silver lining.

Your credit card balances can have a significant impact on your scores, and a lower balance could improve your scores. Additionally, paying down credit card debt could help you save on interest payments, which could help you avoid missing bill payments. If you want to check your credit report or score and monitor your progress, Experian gives you free access to your Experian credit report and credit score.