The MOST Effective Way to Stop Impulse Spending

The Achilles’ Heel of Shopping Addiction

The shopping addiction part of your brain is about to throw a fit. It knows this one change will seriously limit it’s ability to make you impulse buy and overspend.^[1]This is probably as good of a point as any to restate that I am not a financial advisor of any kind. You are the one who knows your finances best and what choices make the most sense for you. Just watch your brain react right now. Here it comes…stop using credit cards. Did you hear that? The internal, “What?! No! That is unnecessary and really impractical. How am I going to easily buy things without my credit card?!” Uh huh, yep. I see you there, brain.

Credit Cards Fuel Spending

A recent study distinguished that credit cards don’t just “let off the breaks” for spending, but “steps on the gas.” It’s akin to giving a 16 year old the keys to a Mitsubishi Evolution and saying, “Drive responsibly, don’t accelerate too fast, or speed. Have fun kid!” Credit cards increase the motivation to spend, as compared to cash, the 1996 Cutlass Ciera of payment methods, which will get you there, it’s just not as thrilling of a ride. When you use credit cards, you tap into a deep neurological reward mechanism, the same reward network that lights up for drugs. 

Honestly Assess Your Situation

There are people who can make credit cards work for them, such as those who gamify reward points to travel hack, essentially getting free vacations. My spouse and I went to dinner with another couple and when the husband started to pull out a card to pay, the wife stopped him as she consulted her phone. She had created a spreadsheet that told her which card would get them the most points for any purchase. I was blown away by her commitment to squeeze every last point out of her cards. This was also how we discovered our shared love for personal finance.

The question is, are you someone who benefits from or is hurt by credit cards? When signing up for a card, it’s easy to think you will be rolling in points, laughing all the way to Hawaii. If you have credit cards, be really, really truthful with yourself and answer the following questions:

1. Do you pay off your card(s) each month?
2. Have you ever missed a payment?
3. How much interest did you pay within the last year?
4. Do you worry that you will not be able to make your payments?
5. Does using a card contribute to you spending more than you would have otherwise?
6. Do you justify purchases because you will get points?

If answering these questions made you realize you don’t have as good of a handle on your credit card situation as you thought, then keep reading for different strategies to eliminate or reduce your credit card use.

Cut ‘Em Up

One of the most surefire ways to curb spending is to get rid of credit cards all together and only use cash. While difficult, this will be the best option for many. Especially taking into consideration the above mentioned study. ^[2]As we become an increasingly cashless society, more strategies and safeguards will need to be implemented to skillfully navigate the digital payment ecosystem.

Remove One-Click Pay and Autofill

At minimum, remove one click-pay and autofill options from your computer and shopping sites. This will slow you down, creating more time and space to consider your purchase. Additionally, it adds an extra step, figuratively and literally, creating friction which makes the purchase a little more inconvenient. I can’t tell you how many times laziness triumphed over the impulse buy. I just wasn’t willing to make the effort to get my wallet. This was especially true when I had a pet or two comfortably slumbering on my lap.

Debit Card

When a situation is too tricky to use cash, consider using a debit card instead of a credit card. This can be a good option if you need to make a large purchase but are uncomfortable carrying a lot of cash. There are some situations where using plastic is a more effective option. With the debit card you know you can only spend up to what you have in the bank. This adds a bit more “realness” to the money you are spending. There are certainly drawbacks to be aware of with debit cards, such as limited fraud protection and overdraft fees if you do spend more than what’s in your account.

Prepaid Debit Card

Load a prepaid debit card with what you have budgeted for a particular shopping trip, such as the grocery store or other retail outlets. Leave all other methods of payment at home. This can have an advantage over the debit card method because you don’t have access to all or your money on the card, just what you added for that outing. A drawback can be the fees associated with prepaid cards. However, your savings from reduced impulse spending may more than make up for the feels. 

Lower Your Limit

If you are not ready to make any other changes, consider lowering the limit on your card. If you impulsively spend, a $10,000 limit puts you at high risk. Be aware that a lower limit will impact your credit utilization ratio if you have a high balance on your card. No matter your card limit, if you are “maxing out” your cards, this will have a negative impact on your credit score. 

Give Your Card a Break

If you read this far, perhaps you are feeling motivated enough to try one of the methods above, or cutting up the cards entirely. If you are still not ready to take any of the steps above, try going a week or two without using your card. At minimum, it will increase your awareness of how habitually you reach for your card and assess if those purchases would have really been worth swiping for.