10 lies that got you (and keep you) in credit card debt

By Karen Datko

This post comes from partner blog The Dough Roller.

While we don't have any credit card debt now, except for 0% APR balance transfers, there was a time when we did. While we never let our credit cards get completely out of control, we did build up several thousand dollars on our credit cards when I first got out of college.

So having gotten into card debt and then climbed out of it, we've learned many of the causes of this financial pain. The fact is, we can talk ourselves into using our credit cards in ways that will hurt our finances down the road.

So here are 10 lies we tell ourselves that get us in credit card debt and keep us there.

It's an emergency. Often we go into debt by convincing ourselves that we have an emergency. Certainly there are times when a true emergency arises. Medical expenses are a good example of a real crisis. But many times what we call an emergency isn't really an emergency. Whether it's a second car that needs repair, or even our child's college education, we can often go without addressing what at first seems like an urgent expense. If life or liberty isn't at stake, it's probably not a true emergency.

We deserve it. This one has snagged us more than once. After working so hard to save money and spend wisely, sometimes we let our guard down under the guise of a reward. Perhaps you've had a hard week at work, and spending $150 on a fancy dinner that you can't really afford seems like a good idea and something you've earned. The problem is that it's like taking one step forward, two steps back. The "reward" just digs you deeper and deeper into debt.

We all need a break now and again. But if you are fighting credit card debt, don't go into more debt as a reward. Find some other way to reward yourself that doesn't make your financial problems more severe.

It's a bargain. Bargains are great, but they shouldn't be used as an excuse to spend more than we have. Great deals also shouldn't be used to buy more than we need. The one thing I've learned is that great deals generally come and go pretty regularly. Regardless, it's not a great deal if you spend a ton of money on credit card interest paying off the debt over months or even years.

It's not much money. It's so easy to spend money we don't have if we spend it in small amounts. Here's a factoid: Last year the Bush stimulus bill sent out stimulus payments to those taxpayers who qualified. Under the 2009 stimulus plan, payments will not be sent in lump-sum checks. Instead, those taxpayers who qualify for a stimulus payment will see their take-home pay increased each month by about $7 to $13. Why? Because we are more likely to spend an extra $10 or so each month than we are a lump-sum $400 to $800.

The same is true with "small" credit card debt. Enough small charges on the card over time can grow into a mountain of debt. If you are fighting your way out of credit card debt, there is no such thing as a small credit card charge.

The payment is small. Let's be honest. How many have justified a purchase based on the monthly finance cost? We all do that when we buy a home, asking ourselves if we can afford the payments. But with credit cards, it can be a real problem. Because most cards calculate the monthly payment at about 2% of the outstanding balance, payments are extremely small compared with the amount owed.

For example, you can nab a $1,000 TV and pay "only" about $20 to $30 a month for it. The small credit card payments have probably caused more financial turmoil for many consumers than any other factor. Remember, the payment may be small and manageable at first, but buy enough on credit and the payments grow substantially. On top of that, you still have to pay back the borrowed amount with interest.

The card rewards make it worth it. We take advantage of many travel reward credit card offers and cash-back rewards. But if the allure of these awards is putting you deeper and deeper into debt, they just aren't worth it. If you pay off your card each month, the rewards are great. But if you don't, stay away from them. In fact, if the rewards are tempting you into credit card debt, get a card without rewards or just use your debit card.

Offers of 0% APR on purchases. The 0% APR and low-interest credit cards can be like a drug dealer giving away his product for free -- at first. Once you're hooked, prices go up, way up. In the case of credit cards, once the 0% APR introductory rate expires, interest rates can easily soar into the double digits. To avoid this, I've often turned down 0% APR deals, particularly those offered by furniture stores and other retailers. If you are going to use a 0% APR deal on purchases, make sure you can pay off the balance in full before the offer expires.

Offers of 0% APR on balance transfers. We've saved a ton of money with balance-transfer credit cards. We transferred home-equity debt from a home remodeling to 0% APR cards and have saved literally thousands of dollars in interest. But we also make sure to pay off the balance transfer before the 0% APR rate expires. We also make sure not to use the card for anything else while we still have a balance on the transfer deal.

Balance-transfer offers can be great, but just like 0% APR purchase offers, make sure you can pay off the debt before the 0% APR offer expires.

It's for my business. A business credit card, particularly for small companies, can serve many important roles. Business cards can be used by employees to easily track their expenses. They can also help keep your business expenses separate from personal expenses, which is particularly important at tax time. But like all credit cards, business cards can also cause you to spend more than you should. It's easy to justify the expense as necessary when you may be able to do without. All small-business owners have to decide for themselves, of course, just how necessary an expense is, but with business credit cards, it can be easy to spend more than you should.

I'll pay it off after graduation. This is perhaps the most insidious credit card lie of all. Study after study shows that the outstanding credit card balance for college students increases as they near graduation. There are a lot of reasons for this, but one reason is that they convince themselves that they can handle the debt once they graduate and get a job. The problem is that they start out in the workforce already in the hole. Credit card debt of $10,000 or more is not uncommon for college graduates. Add to that school loans, and debt can be overwhelming even before they get started.

So if you are a high school or college student, avoid revolving credit card debt like the plague.