Here's why it’s so hard to remain debt free after paying off your credit card (2024)

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While paying down debt is often easier said than done, sometimes, even when we finally experience that sweet, sweet feeling of having a $0 credit card balance, it usually isn't too long before we start to see the balance balloon once again.

Below, Select breaks down three main reasons why staying debt free is so tough for so many people and what you might be able to do to help get things back on track.

Anemergency fundis a very important part of your finances and the money in that account should only be used forsurprise expenses, for instance, if your car suddenly needs an unexpected repair or if you lose your phone and need to replace it ASAP. That way, you can avoid goingdeeper into debt and still cover unexpected bills.

When you don't have an emergency fund set up or enough cash on hand to cover surprise expenses, your first instinct may be to use a credit card to float the fee. Depending on how much it costs, doing this could leave you having to make small payments over several months to become debt free again.

Having an emergency fund of just $1,000 can help you feel better equipped to handle the unexpected without having to take on too much additional debt. While most experts say you should aim to save three to six months' worth of your necessary living expenses in an emergency fund, it's fine to start small and work your way up from there.

It can also help to use a high-yield savings account such as the Ally Online Savings Account or the Marcus by Goldman Sachs Online Savings Account, so you can earn more interest each month compared to traditional banks and grow your balance just a little bit faster.

It's no secret that the cost of living has been increasing lately due to inflation. After all, inflation in 2022 has had the biggest impact on all the essentials, including the cost of gas, buying a car, rent and groceries. Even if you've always deemed yourself to be pretty good at budgeting, if your monthly income just doesn't provide enough money to support these price increases, you may find yourself falling back onto a credit card so you can afford some of these big-ticket items.

From there, you might find yourself continuing to pay for groceries or gas with a credit card each month and before you know it, you will have racked up a sizable balance again. Even if you used a rewards credit card like the Blue Cash Preferred® Card from American Express — which gives you 6% cash back on up to $6,000 per year on purchases at U.S. supermarkets (then 1% thereafter), and 3% cash back at U.S. gas stations — the cash back is only impactful when you can pay off your balance in full each month and avoid paying additional interest charges.

Changing our spending habits is often difficult since our subconscious beliefs and past experiences play such an important role in our relationships with money. According to Paco de Leon, author of"Finance for the People: Getting A Grip On Your Finances," not recognizing and dealing with these underlying beliefs can keep us trapped in a cycle of paying down debt only to incur it all over again.

For example, someone who gets stressed out and copes by shopping online may work hard to pay off their credit card debt completely, but the next time they use retail therapy to ease their stress, they'll just end up right back in credit card debt. In this case, paying off their balance won't do anything to address how they cope with stress, and the cycle of debt will continue.

De Leon recommends journaling or hiring a coach as a great way to start to uncover some of your beliefs and habits around the way you spend money and use debt. It may also help to use a budgeting app such as YNAB (You Need A Budget) or Mint to get a clearer picture of where your discretionary spending is highest and possibly pinpoint significant triggers that may have caused it.

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