Millennial Money: 3 signs you may need a credit card hiatus
If you’re struggling to keep up with payments or save toward a goal, continuing to use a credit card for all purchases can hinder financial progress
When your finances start to spiral and it becomes increasingly difficult to keep up with credit card payments or build toward financial goals, switching your payment method temporarily to cash or debit could help.
Spending with credit cards can stimulate the brain’s reward center and drive you to make more purchases, according to a recent 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 the costs of interest charges on outstanding debt by using cash instead.
A vacation from credit card spending isn’t for everyone, though. If you want to preserve your credit scores, you’ll 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.
