A credit card can earn you rewards and provide purchase protection that is unmatched by debit cards. Overspending on daily purchases with a credit card can result in high interest debt and excessive spending. Both statements are true. However, the latter statement is more true for me as a credit card team Nerd.

A credit card can be an excellent tool for those who use credit cards to get rewards, avoid overspending, and pay their balance in full. Although I know the benefits of credit cards, they are not an option for my daily purchases.

Morgan Housel, author of “The Psychology of Money”, states that “knowing what you should do does not tell you anything about what happens when you attempt to do it.” I have beaten myself up over the years for not controlling my credit card spending. Financial education is only part of the battle. Knowledge is important but it is not enough. Our daily experiences with money can have an impact on our financial decisions, regardless how informed we may be.

Do you sound familiar? If you are spending too much on credit cards each month, here are some things you should consider.

1. A person’s ability to balance their finances does not reflect on them.

Many people feel guilty or ashamed about their credit card debt. This is especially true if they believe that they have made mistakes (e.g., overspending). The truth is that no one can make perfect financial decisions. There’s more room for error when there’s less money.

It’s not likely that you are having difficulty making ends meet every month. Perhaps you ordered pizza delivery because you were too tired to cook dinner or got a parking ticket. I know I have spent a lot of time feeling guilty for any money decisions that were less than ideal. This was especially true when my income was not sufficient to cover the costs. It can be costly and demoralizing to have a credit card balance, no matter the reason.

However, life is costly and this year was especially expensive. If you are in credit card debt, you should forgive yourself for the money you spent on necessities and other things. To save your mental and financial future, create a debt repayment plan.

2. Not only is debt a sign that something is wrong, but so is the other indicator.

It is a sign you are spending too much on credit cards. You might be able to make your monthly credit card payments, but you may notice that you have less money for savings or investments.

For me, this was true. Although I have been in and out debt over the years due to my increased income, credit card spending wasn’t putting my in the red, but it was taking away my financial goals like saving for a down payment for a house.

Examine whether your credit card spending is helping you. You may be surprised at how little money you have left over each month to pay your balance or do anything else. Are you able to access your credit card so that all your income can be used for the necessities or are there more things you care about?

3. If you don’t have a balance, rewards are not worth it.

“But the rewards!” “But the rewards!” However, it is not worth the risk if your balance is high.

You can spend $1,000 each month on credit cards and receive 2 cents cash back rewards per dollar spent. This would give you $20 a month, or $240 over the year.

According to the Federal Reserve Bank of St. Louis, the average credit card rate for accounts that assess interest was 20.40% as of November 2022. You would pay 500 per month, but charge the same $1,000 each month and still earn interest. This would make your rewards outweigh your costs in six months. Your interest would exceed your rewards if you only made a minimum payment of $25 per month. This would take less than four months. Signing up for a bonus might mean that your rewards are longer than your interest, but your credit card will eventually start to cost you if your balance isn’t paid off each month.

4. It doesn’t need to be all or none

Some may suggest that chronic overspenders cut down on their credit cards. However, this doesn’t necessarily have to be the case. You can strive to achieve a balance, just like with everything else.

Although I use a debit to pay daily expenses, I keep credit cards in my savings system. Fixed expenses are those that don’t change (or don’t vary much) month to month. These include child care, utilities, and subscriptions. Credit cards automatically pay these costs and they are paid off each month. This balance is stable each month so there are no surprises or chances to overspend. For variable expenses, such as grocery shopping, dining out, and extracurricular activities for my children, I use a debit credit card.

This might be a way to choose fixed vs. variables expenses. You could also avoid using credit cards in areas that are likely to cause you overspend such as DoorDash or shopping at Target.

It doesn’t need to be perfect. Credit cards are a part of your financial plan, but not your entire financial portfolio. Credit cards can also be used to purchase gas or hotel rooms, which may make them more secure and convenient. However, ultimately you will have to decide if credit cards are suitable for all of your purchases or just a few.

5. Do what is best for you

Most people have heard the phrase “personal finance is personal.” While cliched, it’s true. While there are some general guidelines that can help you figure out your finances, ultimately you have to live with what you create. If the best way to accomplish something is not for you, then don’t do it. Use the second-best or worst method instead. It’s okay as long it helps you succeed now and in the future.