Almost half of all Americans carry a balance on their credit card, month after month. If you’re among their ranks, you know that the combination of high prices and high credit card interest rates can make it challenging to pay that debt off in full.
Many cardholders have seen their interest rates creep up in recent years, in line with the Federal Reserve’s recent rate increases. That means interest payments are gobbling up a bigger share of credit card balances. And those credit card balances can be major. This kind of debt hit a staggering $1.12 trillion for the first quarter of 2024, according to data from the Federal Reserve Bank of New York.
But the situation isn’t hopeless, however. If you’re one of the cardholders who can’t pay credit card debt in full, here are five steps you can take to address it.
Step 1: Check your Credit Card Interest Rate
If you haven’t carried a credit card balance before, you may not be aware of what interest rate your credit card is charging. But it’s important to know exactly how much you’re getting charged so if you need to, you can budget for interest expense as well as your purchases.
The average credit card interest rate for all new card offers was 24.84% in mid-2024. (Depending on what type of credit card you have, your credit score, and your credit history, you may have a higher or lower interest rate than the average.)
With interest rates this high, it can be a real financial setback to carry a balance for an extended length of time, making only the minimum credit card payment. You may find that you are only paying interest and making little headway in paying off what you actually spent.
If you pay your credit card statement balance in full by the due date, a credit card grace period will usually take effect for the next billing cycle. That means you won’t owe interest on new purchases until the due date for the next billing cycle. If you pay that statement balance in full by the next due date, the grace period will continue into the next cycle, and on and on.
But, if you make only the minimum payment or a partial payment on the full statement balance by the credit card due date, you’ll get charged interest on the remaining balance and lose your grace period for the next billing cycle. This means you’ll owe interest on any purchase immediately. Even if you go back to paying the full balance, your grace period may not renew for several more cycles, depending on the specific terms of your credit card.
If you’re in a position where you can’t pay credit card bills and must move to partial payments, make sure you’re aware of the additional interest expense you’ll incur on the remaining credit card balance. Try your best to stop making new purchases with that card since interest will be charged on those purchases immediately.
Step 3: Look at Changing Your Due Date
If you’re feeling overwhelmed because many of your bills are due at the same time, talk to your credit card company about changing your due date. You might be able to move your credit card due date to a day of the month that works better for your budget, so the payments you owe are a bit more staggered.
While this switch might not help immediately to pay down credit card debt, it could offer some relief in the long run.
Step 4: Explore Ways to Pay Off Your Balance Faster
You may find that with higher interest rates and inflationary spending, you need a more efficient way to pay off your credit card debt, such as by refinancing credit card debt. Luckily, there are some options for how to pay off credit card debt, though keep in mind the best way to pay off credit card debt will depend on your financial specifics.
Balance transfer credit cards that offer a limited time low or sometimes even 0% interest rate can help — especially if you think you can pay the balance in full during the promotional low-rate period.
Another option you might consider is applying for a low-interest personal loan to pay off credit card debt in full. This could help you secure a lower interest rate, and by consolidating your credit card debt, you’d have fewer due dates to keep track of. Keep in mind, however, that there are pros and cons of personal loans to pay off credit card debt.
If you’re finding it hard to make your credit card payments, that can be a signal it’s time to take a close look at your spending, perhaps with the help of one of the many online budgeting tools available.
Personal finance tools can help you understand just how much your cost of living has risen in recent months and make it easier to flag places you can cut back. Some can help to pinpoint fees you may be paying unwittingly or the automatic payments you’re making on your credit card that could get trimmed. Cutting these costs can then make it easier to pay off credit card debt.
The Takeaway
If you’re struggling with a credit card balance you can’t pay off, taking steps to pay off credit card debt faster and budget smarter can help. These can involve understanding your rate, changing your payment due date, and other moves.
Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.
FAQ
What is a fast way to pay off credit card debt?
You might be able to use a balance-transfer credit card and pay down your debt during the 0% APR promotional period. Or you might consider securing a personal loan to pay off the debt. You would then pay off the personal loan, which could have a lower interest rate.
Can you change your credit card payment due date?
You may be able to change your payment due date. See if your card’s website or app allows this kind of shift, or contact customer service.
Do most Americans carry credit card debt?
According to recent data, approximately 49% of Americans carry credit card debt.
Photo credit: iStock/Sneksy
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Writing a check to yourself is one way to withdraw money from your bank account or transfer funds from one account to another. While there are other, more high-tech methods for making these transactions, writing a check to yourself is an easy option.
But it’s not the best choice for every situation. Sometimes, it’s more efficient to move funds electronically or visit an ATM to make a withdrawal. Here’s when writing a check to yourself makes sense, and how to do it.
• Writing a check to yourself is a way to transfer money between your own accounts.
• Start by writing your name as the payee and the amount you want to transfer.
• Sign the check on the signature line as the payer and write “For Deposit Only” on the back.
• Deposit the check into your other account through a mobile banking app or at a bank branch.
• Keep a record of the transaction for your own records and to reconcile your accounts.
How to Write a Check
If you don’t often use your checkbook, you may be wondering how to write a check. First, be sure to use a pen (that way, the information can’t be erased) and choose blue or black ink. Then, for every check you write, fill in each of the following details:
• The date
• Pay to the order of (the person or company the check is for)
• The amount the check is for in numbers
• The amount written out
• Memo (this is optional—you can use it to note what the check is for—or leave it blank)
• Your signature
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The only difference when you write a check to yourself, versus a check to someone else, is that you put your own name on the “Pay to the order of” line. Then, just like you do for every other check you write, you’ll add the date, the dollar amount written in numbers, the dollar amount written in words, an optional memo, and finally, your signature.
Be sure to record the amount the check is for in the check register that comes with your checks when you order them (you should keep this in your checkbook along with the checks themselves). In the register, write down the date, the check number, the name of the person the check is for and/or what it’s for, and the amount. This will help you balance your checkbook so you know how much money is in your account.
Why Would You Write a Check to Yourself?
Writing a check to yourself is the low-tech way of transferring money from one bank account to another, or withdrawing money from your bank account. Here is when it can make sense to write a check to yourself.
• Making a transfer. If you’re closing one bank account and opening another, you can move funds by writing a check to yourself. You can also write yourself a check to deposit funds from one account into another at the same bank. Or, if you have accounts at different banks, you can transfer money by writing yourself a check from one bank and depositing it in the other.
• Getting cash from your bank account. If you want to withdraw money from the bank, you can simply write yourself a check, take it to the teller at the bank, and cash it. Just be sure to endorse the check by signing it on the back.
Examples of When You Would Write a Check to Yourself
If you have money in different bank accounts and need to consolidate your funds in order to make a large purchase, you could write a check to yourself. For example, if you’re remodeling and need to transfer $20,000 from your home equity line of credit (in one institution) to your bank account (in a different institution), you can write a check to yourself to transfer the money.
When Writing a Check to Yourself Doesn’t Make Sense
Writing a check to yourself isn’t always the best, most efficient option for transferring funds or obtaining cash. Online banking, electronic transfers, and ATMs are typically faster and easier ways to get transactions done.
Transferring Money Within the Same Bank
If you have two accounts at the same bank and you want to move money from one account to the other, it’s much quicker and more convenient to transfer your money through online banking. Writing yourself a check to do this is a hassle.
If you need to withdraw cash from your account, using an ATM can be faster and easier. If you write a check to yourself, you will need to visit the bank and go through a teller in order to cash the check and get your money. Just make sure to use an ATM within your bank’s network to help avoid ATM fees.
Risks and Concerns of Writing a Check to Yourself
When writing a check to yourself, never make the check out to “Cash.” Instead, always put your own name on the “Pay to the order of” line. This helps protect you. Otherwise, if a check is made out to “Cash,” and the check is lost or stolen, anyone can cash it.
There are several other ways to move money that are more convenient than writing a check to yourself. This includes wire transfers, ACH transfers, electronic funds transfers, and electronic banking.
Wire Transfer
Often, when people use the term “wire transfer,” they’re referring to any electronic transfer of funds, but the technical definition involves an electronic transfer from one bank or credit union to another. To make a wire transfer, you’ll pay a fee, usually between $5 and $50, and need to provide the recipient’s bank account information.
An ACH is an electronic funds transfer across banks and credit unions. If you have direct deposit for your paychecks, for instance, that money is transferred to your bank account through ACH (which stands for Automated Clearing House). You can use ACH to transfer money from an account at one bank to an account at another. The transaction is often free, but check with your bank to make sure.
Electronic Banking
Online banking will allow you to move your money from one account to another within the same bank. All you need to do is log into your online account and use the “transfer” feature.
The Takeaway
Writing a check to yourself is one way to transfer money or obtain cash, but there are many methods for doing these things that are often more convenient, such as online banking or electronic transfers. Exploring all the options can help you decide what makes the most sense for you.
Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.
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FAQ
Can you legally write a check to yourself?
Yes, it is legal to write a check to yourself, as long as you’re not writing the check for more money than you have in the bank. It would be illegal to write a check for more funds than you have and then try to cash it.
Can I write a large check to myself?
Yes, you can write a large check to yourself if you have enough funds in your account to cover the amount. Never write checks for more money than you have in your bank account.
Can you write your own check and cash it?
Yes, you can write your own check and cash it at your bank or at any other location that offers this service.
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A second chance checking account can help those with negative past banking history access banking services. It can be a place to deposit and spend money, though it may not offer all the features of a standard checking account.
These second chance checking accounts can be an important step for many people on their journey to enjoying full banking privileges. Learn more about them here.
🛈 Currently, SoFi does not provide second chance checking accounts.
Who Is a Second Chance Banking For?
Second chance banking can help those who have negative marks on their past banking record. To understand this, it’s important to know a bit about what ChexSystems is. Think of it as the banking equivalent of a credit bureau. It catalogs information on consumers’ banking histories, including basics like name, contact information and Social Security number, as well as information on account closures, bounced checks and overdrafts, unpaid balances, suspected fraud, and more.
When a customer applies for a new checking account at a bank or credit union, the institution may look up the ChexSystem report to determine whether or not it’s willing to extend its services. Negative report items — such as unpaid overdrafts, involuntary account closures, or a high number of recent inquiries — can cause a bank to refuse regular checking services to the client.
That’s where second-account checking comes in. A second-chance bank account is one where the bank offering the account is willing to overlook a less-than-stellar banking history. This means a client can continue to use a bank account while rebuilding their ChexSystem report.
While this type of account isn’t available at all banks, it is available at many, including some major traditional and online banks, like Wells Fargo, Chime, and Varo.
In other words, an imperfect banking history doesn’t have to mean living an unbanked existence.
How Does Second Chance Banking Work?
Here’s how second chance banking operates: much like any other regular checking account. The account holder deposits money into the second chance checking account, which they can then access using a debit card or making a withdrawal at an ATM.
Specific account features will depend on which institution is offering the account. For example, some banks may offer free paper checks, and many have convenient mobile banking features.
However, some banks may charge monthly service fees or minimum opening deposits, and may not allow second chance checking account holders to use paper checks. And although checking account interest rates are notoriously low, it’s unlikely your second chance checking account will accrue any interest at all.
That’s why, as when opening any other kind of bank account, it’s important to review the fine print closely to ensure you know what you’re getting into before you apply.
Applying for one of these accounts typically works in the same way as opening a bank account of any kind.
• The bank will ask for a variety of personal information, and you may be asked to verify your identity with a form of official identification like a driver’s license or Social Security card.
• You can do this in person or entirely online.
• Depending on the institution, you may be required to put down a minimum initial deposit. However, in many cases, you will find second chance checking with no opening deposit, meaning the account will be 100% free.
• You may need to wait a few business days for your application to process, and then you should be in.
Once you’ve opened a second chance checking account, you can use it as normal to pay bills, restaurant tabs, and grocery store totals — whatever expenses come up in your day-to-day life. Meanwhile, the negative items that might be on your ChexSystems report will slowly vanish. Most records fall off after five years.
If you’re interested in cleaning up your ChexSystems report, know this:
• Consumers also have the right, under the Fair and Accurate Credit Transaction Act (FACTA), to request a free ChexSystems report once a year. A request can be made by phone, mail, fax, or online form, allowing review of the report for any incorrect negative items and disputing them.
• If you do dispute something on your record, the investigation will generally take about a month. You will receive a letter in the mail notifying you of the results.
Over time, it’s possible to clean up a ChexSystems record — which can unlock the ability to pursue other types of banking services, including high-interest deposit accounts.
While second chance banking does provide a valuable service, there are some drawbacks to these accounts as well. Here are the pros and cons of second chance checking accounts.
Pros:
• Allows clients to use a checking account even without a perfect banking history.
• Gives account holders time to rebuild their banking history and let negative items fall off their ChexSystems report.
• In many cases, second chance checking accounts are free and don’t require a minimum opening deposit.
Cons:
• Some accounts may assess monthly bank fees and have minimum opening deposits — and may not offer waivers.
• The account may have limited capabilities (such as an inability to use paper checks or to access overdraft protection).
• The account is unlikely to offer interest growth on account balances.
Alternatives to Second Chance Banking
Second chance checking accounts are a solid option for those who might not be able to open a traditional checking account because of their banking history. But they’re not the only alternative. Here are two options:
• Prepaid debit cards. A prepaid debit card can be used to pay bills and other expenses without using cash. It works like a gift card: Clients load the card with a certain amount of money, which they can then use as they see fit. The cards are also reloadable, making them a fair option for working around the handicap of not having a bank account.
What’s more, many prepaid debit cards don’t require a credit check to open. This makes them a viable choice for those with poor credit histories as well as poor ChexSystems reports.
That said, there are pros and cons of prepaid debit cards. In terms of downsides, they often include a variety of fees — such as monthly maintenance fees, activation fees, and reloading fees — which can eat into the user’s balance and make them unsustainable for long-term use.
• Cash. Others who find themselves unbanked might try to simply pay their way through life using cash. After all, you can often get a paycheck cashed at the nearest major grocery store or retailer.
However, there are downsides: Check-cashing services generally come with a fee. Plus, many utility companies, landlords, and other bill collectors don’t accept cash as payment. And if your cash is lost or stolen, there’s no reliable way to get it back. It’s gone.
The Takeaway
Second chance bank accounts can help those who are unable to get a standard bank account. While it doesn’t have all the features of typical accounts, it can offer a path to being banked and graduating to a full-fledged checking account.
FAQ
What is second chance banking?
Second chance banking is a kind of account that serves people who may not have a perfect banking record. If you have negative items on your ChexSystems record, you may still qualify for this kind of account.
What is a second chance bank account?
A second chance account is one that can be opened even if you have a less than perfect history with banking. It may have some downsides (monthly fees plus no overdraft protection, for example), but it allows people to get back in the game and have checking privileges.
Who is second chance banking for?
Second chance banking is for people who have negative items in their banking history. These typically include unpaid overdrafts, involuntary account closures, and other events which show the account holder did not use their privileges responsibly.
SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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It’s not uncommon to feel guilty about spending money, even when it’s a necessary purchase, since you may believe the funds could be better applied elsewhere. Perhaps you could buy something better, or maybe you could use the cash to pay down debt or save for the future.
Some purchases trigger more guilt than others, and some people are more prone to experiencing this unpleasant sensation than others. Read on to learn more about feeling guilty after spending money.
Is Spending Money a Bad Thing?
Spending money in and of itself is not a bad thing. In fact, it’s a necessary reality of life, and financial products like checking accounts and credit cards are designed to enable it. It would be hard to imagine navigating daily life without spending cash to, say, buy food or commute to work.
But there are a lot of opinions out there about how people should spend their cash, which can lead to conflicting emotions. Treating oneself can stir up feelings around self-worth, and spending money on a big-ticket item can trigger anxiety about future finances. (You’ll learn more about these scenarios in a moment.)
Despite money’s necessary role in life, feeling guilty about spending it is fairly common. One recent LendingTree survey found that 71% of respondents reported feeling that way. That sensation can snowball, creating free-floating money worries.
Spending cash is an inescapable reality, but the guilt associated with it doesn’t have to be.
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Reasons Why We Feel Guilty About Spending Money
Often, guilt and anxiety around spending money come from the motivation for the transaction, not the purchase itself. Learning to stop feeling guilty after spending money may require people to notice when they feel guilt or shame after a purchase and change their mindset or spending behavior accordingly.
Everyone has different emotional triggers around their spending, but there are some common scenarios when someone might feel guilty, such as these:
Buying Items to Keep Up With Friends
FOMO, or the “fear of missing out,” may be a silly acronym, but it’s a powerful motivator for spending.
People may spend more so they don’t miss valuable time with friends or feel they are fitting into their group of pals. That could mean paying too much for a vacation or buying a cool new watch they see friends wearing. These expenses can be small, subtle purchases, too, like meeting a friend at a pricier restaurant than you’d usually visit, or it could reflect a significant financial decision, like buying a new instead of used car to “keep up with the Joneses.”
FOMO spending may make someone feel guilty about spending money because it’s tied to the deep desire to fit it. It is often more about self-image and self-esteem than a particular item.
Buying Items That Do Not Align With Our Financial Values
Similar to FOMO spending, cultural messaging about “the right way” to spend can lead to a sense of guilt or buyer’s remorse.
It may be the influence of social media encouraging someone to buy a certain brand or societal pressure (the American dream) to own property. Whatever the purchase is, guilt could crop up because it’s not something the individual truly wants — and deep down, they know that.
Saving Goals Impacted by Impulse Spending
An impulse or unexpected purchase could lead to feeling guilty after spending money.
It could be something as simple as forgetting lunch at home and having to buy something expensive near the office. Or maybe it’s buying something you totally didn’t plan to but saw it was on sale. It may be a small purchase, but it eats into your budget and savings goals because it’s unexpected.
Many of these purchases arise from a lack of planning, leading to guilt. You feel as if you messed up, and now you are literally paying for it. Buying a new set of luggage, for instance, is not a good reason to use emergency funds or money in your savings account, so you may be upset with yourself.
Having a Money Mindset Tied to Emotions and Past Experiences
Guilt about spending money may have little to do with the individual and be more connected to their family or upbringing.
People who grew up with parents or guardians in debt may experience feelings of scarcity around money. If you grew up always hearing there wasn’t enough money and getting calls from collection agencies, you may hold a sense of guilt with every purchase.
Or, if someone’s experienced debt in the past, any transaction may trigger anxiety as they remember their old patterns of overspending.
Tips to Help You Stop Feeling Bad About Spending Money
Instead of agonizing over every purchase or waking up worried about bills, it may be time to stop feeling guilty when you spend money. Here are some strategies to help combat those negative feelings while improving your financial wellness.
Taking Care of Financial Responsibilities
When people prioritize financial responsibilities, they may feel less guilty spending the surplus, or leftover money, in their budget.
That means enacting a “paying yourself first” mindset, which can be one of the most important personal finance basics. When a paycheck deposits, immediately put money away towards future goals, like retirement or savings. Setting up automatic transfers makes it easy.
Taking care of financial responsibilities first can give someone the freedom to use the remaining cash relatively guilt-free.
30-Day Savings Rule
To avoid guilt over impulse spending, try implementing a 30-day rule on purchases. If you want to purchase something, whether it’s a new laptop or a new coat, wait 30 days. After 30 days, you can buy it. But in many cases, you may find you don’t even want it anymore.
If impulse purchasing is a major source of guilt, consider a 30-day freeze on shopping, buying only necessities for a month. This can be a good tip to stop overspending. It can help you reset your spending behaviors.
Improving Your Money Mindset
Understanding needs versus wants can be a helpful way to understand and improve money mindset.
For some, the idea of a want is “bad,” translating to guilt when a purchase isn’t absolutely necessary. But, wants can make life more comfortable and bring pleasure — two very good things. So the key is differentiating between needs and wants, and understanding where wants fit into a budget. Perhaps not every want can or should be satisfied, but recognizing they are part of life and budgeting for them is important.
You might try the 50/30/20 budget rule, which says to put 50% of your after-tax earnings towards needs, 30% to wants, and 20% toward savings.
Creating a Personalized Budget
Sometimes guilt stems from the unknown. If someone doesn’t know how much cash they have in their bank account, they may feel guilty purchasing something.
This is where a personalized budget comes into play and can help you manage your money better. Everyone’s budget will be a little different, but feeling knowledgeable about and in control of one’s money can help alleviate guilt.
For example, if someone looks forward to having brunch out every Saturday, they may create a line item in their budget for it. That way, they don’t feel guilty spending the money as it’s earmarked for that purpose. They eliminate the possibility of anxiety spiraling over that cost.
Only Spending Money That You Have
It sounds like common sense, but only spending money that’s available can help prevent guilt around money. It’s an unhappy fact that many Americans carry credit-card debt: The typical balance is currently approximately $6,900, and the average credit card interest rate is almost 25%.
There are of course times when paying with a credit card and carrying a balance are necessary, such as when your hot-water heater breaks or you get hit with a major dental bill. But in general, it’s wise to pay with a debit card or cash so you don’t wind up getting stuck with high-interest debt. By only spending the money you have, you can avoid guilt, worry, and a lower credit score to boot.
Guilt isn’t constructive and won’t change your financial situation. However, working on financial discipline can improve the overall outlook on spending and make sure your purchases are ones you can truly afford.
The Takeaway
People feel guilt about spending money for many different reasons, even when they can afford their purchases. Getting rid of that guilt is possible through understanding why spending makes someone feel guilty and learning financial responsibility to prevent guilt altogether.
One place guilt shouldn’t crop up? In a bank account. Avoid it by knowing that you have an account that pays you a terrific interest rate while charging you no fees.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.
FAQ
How do I get over my guilt of overspending?
First, figure out what kind of spending makes you feel guilty and why. Perhaps it’s based on childhood or past experiences. Then, consider creating a budget and planning purchases to avoid buyer’s remorse or impulse spending.
What is the psychology behind overspending?
People may overspend because they’re afraid of missing out on experiences, they want a self-esteem boost, or they want to fit in with their peers.
How do you forgive yourself for not saving money?
Understanding the emotional triggers behind overspending and not saving can help build a sense of self-compassion. Many people overspend or fail to prioritize saving. Dwelling on it won’t change the past. For these reasons, forgiving yourself and moving on is best.
SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.
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Sooner or later, most of us hit that moment where we need some cash — and fast. Maybe a major car repair or medical bill arrives, you get laid off, or you simply overspend for a period of time: All are ways that you can unfortunately find yourself in a hole financially.
A particularly expensive (or unlucky) month might make a credit card cash advance seem appealing. But before you go ahead and get a bundle of bills from your credit card issuer, read up on the consequences of doing so.
Can You Get Cash Back from a Credit Card?
Yes, it’s possible to get a cash advance on a credit card. But just because you can do something doesn’t always mean you should.
A credit card cash advance is a stopgap for a financial emergency that can come with high costs to a person’s immediate financial situation. Furthermore, if not paid back quickly, it may also affect their credit history in the long term.
While a cash advance is certainly easy (it’s similar to making an ATM withdrawal from your checking account), there are typically better and more affordable options for most financial needs.
A credit card cash advance is used to get actual cash against a credit card account’s cash limit, which might be different from the credit limit. It’s essentially a loan from the credit card issuer. Here’s how it usually works:
• You put your credit card into an ATM, enter the card’s PIN, and choose an amount to withdraw. The cash is then dispensed for you to use as you see fit.
• If you don’t know the card’s PIN, a cash advance can be completed by going into a bank or credit union with the credit card and a government-issued photo identification.
• A cash advance check directly from the credit card company — sometimes included with mailed monthly billing statements — can also be used to get a cash advance.
Why Do People Use Cash Advances?
Why use a cash advance from a credit card? The bottom line: convenience and speed. ATMs are plentiful in most towns, and it takes just a few minutes to complete the process of getting a cash advance at an ATM. There’s no approval process required either.
Some people may assume they don’t have enough time to access other kinds of credit. This isn’t always true, however. For instance, funds obtained through an unsecured personal loan are sometimes available in just one to five days after approval of the loan.
As fast and simple as a credit card cash advance may seem, however, there are significant costs involved. Realizing the financial impact of these withdrawals may encourage a person to look elsewhere for funds.
A cash advance is an expensive way to borrow money. To put it in perspective, they’re just a step up from payday loans (which typically have much higher interest rates than credit card cash advances, extra fees, and short repayment terms). Here’s a closer look at how these expenses can pile up.
Cash Advance Fee
It’s typical for credit cards to have a fee specifically for cash advances. This fee can be anywhere from 3% to 5% of the total amount of the cash advance. This fee is added to the account balance immediately — there is no grace period.
Higher APR
The average APR, or annual percentage rate, a credit card issuer typically charges for a cash advance is quite a bit higher than normal purchase charges. Currently, the average credit card interest rate on purchases is almost 25%. But what is the APR for a cash advance? The rate is likely to be between 25% and a whopping 30% or more, according to recent research.
What’s more, unlike interest charged on regular purchases, there is no grace period for the interest to start accruing on a cash advance. It starts accumulating immediately and increases the account balance daily.
ATM Fee
Getting a credit card cash advance from an ATM may also mean incurring an extra fee charged by the ATM owner, if that’s not the financial institution that issued your credit card. These fees currently average $4.73 or so per transaction. As you see, the ATM fee can increase the charges for a cash advance, which often add up quickly.
Payment Allocation Rules
If you’re thinking that a cash advance can be paid off first and then the interest rate will revert to the lower rate charged on regular purchases, guess again. While federal law dictates that any amount more than the minimum payment made must go toward the highest interest rate debt, the minimum payment amount is typically applied at the credit card issuer’s discretion. This might well work in the card issuer’s favor, not yours.
You might be wondering just what a cash advance looks like in actual dollars and sense, so let’s consider this scenario.
Say a person is carrying a credit card balance of $1,000 with an APR of 25%. Perhaps they are trying to financially survive a layoff and need funds, so they find out how to get a cash advance on their credit card and take out $1,000 with a 30% APR. When they receive the billing statement, they pay $1,000 toward their credit card balance.
The minimum payment due amount of $35 is applied to the regular purchases that are accruing interest at a rate of 25%. The remainder, $965, is applied to the cash advance balance that’s getting charged a 30% interest rate.
In order to completely get rid of that 30% APR, the account holder would have to pay the full $2,000 balance.
The cash advance will only be paid off when the entire credit card balance is paid in full, which means they could be setting themselves up with higher interest charges for a long time to come.
Waiting until the next monthly statement is available will just increase the amount due. Every day the cash advance accrues interest, it costs the cardholder more money. The faster the balance is paid off, the less interest will accrue.
Using a credit card interest calculator can be enlightening when figuring out how much purchases or cash advances will really cost with interest applied and how much time it might take to pay them off.
Personal Loans vs Cash Advances
Now you understand how to get a cash advance from a credit card and the expenses involved. So what are the alternatives to this kind of a cash advance? Ask friends or family for a loan? Find ways to make money from home?
While those options are certainly acceptable, an unsecured personal loan might also be an option for some people. These loans can allow you to get funds at a lower interest rate that you can use to pay off your high-interest debt. Here’s how they usually work:
• An application for a personal loan online can typically be completed in minutes and, if approved, the borrower may possibly get the funds within a couple of days. Personal loans can be used for a variety of reasons.
• Some common uses for personal loan funds are debt consolidation, wedding expenses, unexpected medical expenses, and moving expenses, to name a few. It’s even possible to use a personal loan to pay off that credit card cash advance, which may cost you a lot less in the long run.
There are several benefits to personal loans that are worth knowing about:
• Personal loans are likely to offer a more manageable interest rate on the money borrowed than the typical interest rate on a credit card cash advance. Of course, the personal loan’s interest rate will depend on the borrower’s creditworthiness, but it’s likely to be lower than the one tied to a credit card cash advance.
• When personal loans are used to pay off a cash advance, they can simplify a person’s debt. With a single personal loan, there is only one interest rate to keep track of, as opposed to juggling two high interest rates: one for the cash advance and one for regular purchases charged to the credit card.
• Credit card debt is revolving debt, which means that the borrower’s credit limit can be used, repaid, then used again, as long as the borrower is in good standing with the lender. A personal loan, however, is installment debt, and has fixed payments and a fixed end date. Unlike the revolving debt of a credit card, the funds from a personal loan can only be used once, and then they have to be repaid.
Personal Loans and Credit Scores
Another upside of choosing a personal loan over a credit card cash advance is that responsibly managing a personal loan might positively impact the borrower’s credit score.
One factor that goes into calculating a FICO® Score is the percentage of available credit being used, the credit utilization ratio, and it accounts for 30% of a person’s total score.
In the hypothetical scenario above, if the borrower had a $3,000 credit limit on their credit card, by using $2,000 of their total available credit, their credit utilization rate would be a whopping 66% (if that one credit card was the only account appearing on their credit report).
It’s fairly typical that credit card users continue to make charges on their accounts, which is likely to keep their credit utilization ratio high.
Installment debt, such as a personal loan, is looked at in a slightly different way in credit score calculations. Making regular payments on an installment loan may carry slightly greater weight than might someone’s credit utilization rate in calculating their credit score. Thus, making regular payments on a personal loan is likely to demonstrate responsible borrowing as the balance is paid down.
As you’ve now learned, considering a variety of funding sources when you need money fast is a smart money move. When you do so, a credit card cash advance may well be seen as a last-resort maneuver.
The Takeaway
Life can certainly deliver some unexpected financial challenges now and then — moments when you need cash quickly, for instance, but don’t have any available. While a cash advance from your credit card may seem like a fast, simple solution, tread carefully. There are significant costs associated with this withdrawal which could leave you with more long-term debt than you’d like. It’s probably wise to explore your options first.
While money management can be tricky at times, partnering with the right financial institution can help improve your financial life.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.
SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.
FAQ
What is a credit card cash advance?
A credit card cash advance is a quick, convenient way to access cash using your credit card. You insert it into an ATM or visit a bank branch to obtain the cash. However, this will likely involve your owing significant fees and being assessed a considerable interest rate on the money you have borrowed.
What are the costs of a credit card cash advance?
A credit card cash advance will involve a fee that’s typically 3% to 5% of the total loan amount. In addition, there may be an ATM fee of several dollars. The money that you are advanced begins to accrue interest right away, and this usually is at a higher rate than your rate on purchases. What is a cash advance APR usually? Between 25% and 30%.
What is the difference between a credit card cash advance and checking account withdrawals?
A credit card advance is significantly different from a checking account withdrawal. With a credit card advance, you are quickly getting access to cash from your credit card issuer. It is a form of a loan, and your interest rate will likely be between 25% and 30% until it’s fully repaid. With a checking account withdrawal, you are accessing your own money, so there’s no interest fee involved, though you might be charged a several dollars if you use an out-of-network ATM for the transaction.
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*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
