You paid off your credit card debt. Maybe you used a bonus, a tax refund, or a lump sum of money to finally get your balance down to zero. You promised yourself that this time would be different. You were going to stay on top of your spending, pay your credit card off every month, and make better financial decisions.
But a few months later, you’re looking at another $6,000, $10,000, or even $12,000 in credit card debt, wondering how you ended up right back where you started.
If you’ve been stuck in the cycle of paying off credit cards only to accumulate more debt, this episode of Money Files is for you.
One of the things I’ve learned from coaching hundreds of six-figure earners is that you can be really good at paying off debt and still struggle with staying out of it. Those are two completely different skills, and understanding the difference is essential if you want to stop repeating the same financial patterns.
In this episode, I’m walking you through three reasons your credit card debt keeps coming back, including why paying off your debt without a plan for what happens next leaves you vulnerable to accumulating new balances, how your credit card can quietly become a second bank account, and why good intentions aren’t enough without a repeatable money management practice.
In this episode you’ll learn…
[00:04:30] Why paying off your credit card without creating a plan for what happens next is one of the biggest reasons your debt keeps coming back, and how to build a plan for staying out of debt alongside your debt payoff plan.
[00:09:45] How your credit card can become a second bank account without you realizing it, including a real client story about a meal prep subscription that was charging both her checking account and credit card for months without her noticing.
[00:16:20] Why relying on good intentions instead of a repeatable money management practice keeps you stuck in the credit card debt cycle, even when you know exactly what you should be doing with your money.
[00:21:10] Why making spending decisions based on your bank account balance instead of your budget can lead you back into credit card debt, even when you’re earning six figures and believe you have enough money to cover your purchases.
[00:25:40] One practical step you can take this week if you’ve been avoiding your credit card statement, including how to identify recurring charges and make one intentional spending decision without overhauling your entire financial life.
Tune in to this episode of Money Files to learn why you keep going back into credit card debt after paying it off and what needs to change so you can stop repeating the cycle, build better money management habits, and finally stay out of debt.
Are you ready to start asking for help with your finances? Apply to work with me, and let’s start working towards your financial goals.
If you loved this episode on breaking the credit card debt cycle and finally understanding the difference between paying off debt and staying out of it, check out Episode 205 | [Debt Identity Series] Why Debt Keeps Coming Back And What To Do About It.
Transcript for “3 Reasons You Keep Going Back Into Credit Card Debt (Even After Paying It Off) ”
Intro: Hi and welcome to Money Files. I’m Keina Newell from Wealth Over Now. I work everyday with professional women and solopreneurs to help them get out of financial overwhelm and shame so they can experience more flexibility and ease with their finances. Are you ready to gain confidence and learn to manage your finances intentionally? Tune in and grab financial tips that will help you master the way you think about and manage your finances.
Keina: Hello and welcome back to another episode of Money Files. I want to just go ahead and talk about debt today. And I specifically want to talk to you if you are someone making six figures or multiple six figures and you relate to having paid off your credit card debt, feeling really good about it, and then six months later or a year later you find yourself looking at another credit card balance. Maybe you had a $15,000 credit card. You got a bonus from work. Maybe your parents gave you some money and you thought, you know what? I’m going to do the responsible thing. I’m going to take this bonus. I’m going to pay off my credit card.
So you did just that. It is cleared, wiped out. You watched your credit card balance go to zero and it felt really, really good because you thought about all the opportunities that you were going to be able to have now that your credit card debt is paid. You’re like, okay, I’m going to start putting money aside for paying on a house. I want to put money aside for vacation. And you told yourself, like, I’m going to do things differently. Like, I’m going to do what Keina said. I’m going to pay my credit card off every single Friday. I’m going to pay attention to my spending and I am going to be more intentional with my money. And it can be true that for a little while you were probably able to do that exact thing. You kept your credit card in check. Nothing bad was happening, but something came up.
It could have been your car needed a repair. You needed some dental work or maybe there was even a trip that one of your friends invited you on. You’re like, okay, I’m just going to put the first deposit on my credit card and I’ll pay it off with my next paycheck. And then suddenly at some point, that next month came and you weren’t able to pay off the balance because of something else that happened in your bank account that month. So it made your credit card high. And now you are in a position where you’re like, how is my credit card back up to $6,000, $10,000, $12,000? Like, how did I get back here? Because I’ve already done this. I’ve already paid off my debt and I’m so tired of being in this like debt cycle.
And so if that’s you, I want to talk to you about three reasons you might keep finding yourself back in credit card debt, even after you’ve successfully paid it off. Because one of the things I’ve learned from coaching hundreds of six-figure earners over the years is that you can be really good at paying off debt and still struggle with staying out of debt. I’m going to say that one more time. You can be really good at paying off debt and still struggle with staying out of debt because those are two completely different skills. So the first reason is you paid off your debt, but you never created a plan for what happened next. That’s the first reason that you keep getting back into debt.
And so one of the first questions I asked when I am on a consult with a potential client or I’m working one to one with my client, is I’m asking them, tell me like, alright, you have $20,000 of debt or you have $30,000 of debt, have you ever paid off your credit cards before? And I asked that because I want to understand their history with debt because all debt has a story. And so maybe you’ve paid off $10,000 before, maybe you’ve paid off $20,000 before, maybe you’ve had multiple times in your life where you’ve had zero credit card debt.
And if that’s the case, then my next question is, well, what happened after you paid off the debt? Because I want to understand how you ended up back in debt and not from a judgmental perspective. I just want to know your patterns because your patterns help me create your budget. But a lot of times what I hear is that someone got a bonus, a tax refund or some other lump sum of money, and they used it to pay off their credit card. And I understand why they did that. But then when they start talking to me about what happened after they paid off their credit card, is they’re like, Oh, well, after I paid off my credit card, something came up and there was a vacation I wanted to go on. And just like things just started to add up really quickly Keina, like, I don’t even really know how I got back here.
For a little point in time, I was able to pay it off every single month. And then maybe about three or four months in, I noticed I had a balance and now here I am. And that can be like the whirlwind experience of realizing that I was once at $0 and now I have debt. I was able to pay it off and now I’m not able to pay it off. So a lot of people would tell me about like a slow progression. Sometimes it can be a little bit different than that, where maybe they had to pay for something. If you’ve ever listened to my podcast about survivor debt, they’re like, Keina I had to pay for a dental expense or I had to help my parent and they really needed me and I didn’t have the cash. So I put it on my credit card.
So it could have been something of that nature, but regardless of that, the point remains is that, that person never created a plan for their expenses. And there’s a good chance that when you don’t create a plan for your expenses, you are going to go right back into debt because you haven’t actually identified the reason that you’re in debt. You think that like, oh, it’s just everything is going to be okay once I pay off the debt and that’s not true. It just fundamentally isn’t true. If you’ve heard me talk about myself and paying off debt with my tax refund, the thing that I kept like not accounting for was anything related to my car. I was like, and I don’t even know.
It just was like, I’m going to just figure it out when it happens. Like, I don’t know. I’m going to have to pay $1,500. I’m just going to figure it out. And the figuring it out meant that it went to my credit card and I was just ignoring, like actually creating a number around that because having this fear, like if I say that I’m going to put money towards my car, like I have to put money towards it. It’s one of those things that when I think about it, I’m like, Keina, that made no sense, right? Why wouldn’t you just save to get your car fixed? And so all of that to say that when I’m working with clients, I’m not just looking at how much money we can throw towards debt or how fast we can pay off the debt.
I’m looking for what’s happening in terms of why you keep getting back into debt. I want to know what bills you have coming up, what expenses do we know about. I need to know about what do we need to save for, what are the things that you want to be able to say yes to because they probably have gone on your credit card. And what I want you to actually create is not only a debt payment plan, I also want you to create a stay out of debt plan. So when we’re thinking about paying off debt, sometimes that doesn’t mean that we’re throwing every single available dollar towards your credit card because it’s not leaving us with room for anything else. And that’s what happens when you are taking a lump sum of money, you’re throwing it all towards your credit card, you haven’t thought about what else do I need to leave room for?
What else is going to change about my financial situation? If I put all of this money towards my credit card, am I going to need some cash flow in the next month for things that I know that are coming up that maybe I’m just not thinking about right now. When people ask me like, Keina, should I take this lump sum of money and pay off my credit card debt? My answer is always like it depends because we have to know whether or not you have a plan for what happens after you pay off the debt because paying off debt and staying out of debt are two different skills. So reason number two is your credit card has become another bank account. This is something that I see all the time with clients and you might tell me, Kena, I actually do a pretty good job managing the money in my checking account. So you have your rent or your mortgage, it’s coming out, your car payments coming out, and you know how much money you have available in your checking account.
But if we would go to your credit card, there’s a whole other set of expenses happening over there. You have subscriptions, you have recurring payments, you probably have services that you signed up for months ago, maybe even years ago that you’re not paying attention to. Maybe like all of your Amazon purchases go to your credit card. This one’s really common and so they’re like out of sight. You don’t even know that it’s happening, but you know that Amazon delivers packages to your house. Or maybe you have a grocery delivery subscription and all of your groceries are going on your credit card. And so you’re not necessarily thinking about those things because they’re on your credit card. So that’s why I’m saying like your credit card is another bank account and those expenses aren’t coming directly out of your checking account. So you’re not necessarily thinking about them when you’re deciding how much money you have available.
So when you go to pay off your credit card at the end of the month, you’re like, $1,500? What? How? Well, that’s really easy when you have your Amazon, even if you just have Amazon and groceries on your credit card, that is very easy to do. You got $200 here, $300 here. Oh, let me get this really quick that I just saw on Instagram and you’re being influenced. And so that credit card is acting as a different bank account and you like, there’s just no mental connection with what’s happening on your credit card. Once again, I’m not saying this as a judgment thing. It’s just what happened. I even have to pay attention to like, I think that’s going to be the danger in having a lot of different credit cards because you’re not paying attention to it.
I had a client and we were doing her budget together. I’m like, okay, do we have your budget in order? Like we’ve thought about what debt you’re going to pay off, what you need to save money for. She’s like been telling me different things that she needs to make payments on. I was like, alright, well now let’s look at your credit card. And as we were looking at her credit card and like looking at the last 30, 60, 90 days of expenses, we found that like one of her meal prep subscriptions was over there. She knew she was paying for this meal prep service, but sometimes it would come out of her checking account and sometimes it was coming out of her credit card. And because before working with me, she’s not always checking. She just knows that the meals come to her house.
She’s not catching this discrepancy. And I can’t even remember if it was that like she had two different accounts and so sometimes it would charge the credit card and sometimes it would charge to her debit card. But those charges, $200 a week, sometimes they would come out of checking. Sometimes they would come out of her credit card, but her credit card was serving as a bank account unintentionally and she wasn’t thinking about those expenses and she wasn’t catching those expenses because looking at her credit card also made her very overwhelmed. So she knew that she should be looking at her credit card, but every single time her credit card balance was coming in and she was thinking about, you know, can I, oh my goodness, my debt is getting higher. My credit card balance is higher than I could think.
Her nervous system was just shutting down. She was not able to do that work and she was overwhelmed. So she had been telling herself that she needed to look at the credit card. She needed to go through the expenses, but every time she thought about it, she was reminded of how much debt she had or how many transactions she needed to look at and how much work that was going to be able to do, like that she was going to have to do. So she just kept putting it off. But when we started working together, one of the things that we actually did was we made sure that we went through those transactions and looked for those things that would have caused her debt to go up and for her to feel like, oh my goodness, my debt is never going to go down.
I’ve been making these over payments and adding more towards my debt, but I’m not seeing it do anything. And we were able to identify those things and then she got to make decisions about like, okay, which of these, do we need to keep any of these expenses that are on this card? Do you want to decrease any of the expenses that are on this car that have just been going over here automatically? But through our like, we spent one entire coaching session just talking through what was going through on her credit card. And she was someone who she was like, Keina, I also have ADHD. And so like, this also can be really overwhelming. So we took one entire 45 minute call and I was like, great, let’s just knock these things out. So you can just feel like a superhero at the end of this call, doing things that you’ve been telling yourself you need to do all year.
But this wasn’t a story of like, hey, you need to cancel every subscription or you’re doing bad with your money, but literally just being blind, because you’re so overwhelmed with what’s going on your credit card could be costing you hundreds of thousands of dollars, because your credit card is being used as the second account. And through working with a coach, it helps you close what I call the intention gap or intention gap. So you have been thinking about like, these are the things that I intend to do. But there is money that’s just lost right now, because you can’t motivate yourself to do it, you feel so overwhelmed by what you need to get done, that you can’t go through and make yourself a list like, you know what it is, but you aren’t going to be able to get to it because you feel so overwhelmed.
And so that’s where coaching is really beneficial. So if you are someone where you’re like, Keina, yes, my credit card is definitely, definitely, definitely another bank account for me, is that we get to go through that together. And it’s not something that you have to do alone. So we can know, here’s how you’re spending money. Here’s how we can manage that money differently. The expenses that we do see on the credit card, let’s make sure that we’re putting those into the budget. So we can think about how all of these things work together. So you can also decide, is this how I still want to spend my money or not want to spend my money, but like, the important decisions that you actually want to be making so you can pay off debt and stay out of debt.
And then the third reason that I would say that you keep getting back into credit card debt is you’ve been relying on good intentions instead of having a repeatable money practice. So this is a part I really want you to pay attention to because I think so many of us have had the experience of knowing exactly what we need to do with our money and still not doing it. You know you need to check your credit card. You know you need to look at your spending. You know you need to make a budget and you might even have a reminder in your phone that tells you to sit down and look at your money every Sunday. But knowing that you need to do something and actually having a practice that helps you do it consistently are two different things. So think about the last time you paid off your credit card.
What did you tell yourself you were going to do differently? Maybe you said, okay, this is it. This is the time I’m going to pay my credit card off every Friday. And that’s a really great intention. But let’s say Friday comes around and you have twelve hundred dollars in your checking account. Your credit card balance is nine hundred dollars. Do you automatically send like nine hundred dollars to the credit card? What if you have a five hundred dollar bill that’s coming out on Tuesday? What if you need to get groceries before you get paid again? What if you have a trip payment coming up the next week? This is why I want you to practice making decisions based on your budget instead of your bank account balance.
Because your checking account might say you have twelve hundred dollars available, but that doesn’t mean all twelve hundred dollars is available for you to spend or put towards your debt. Some of that money may already have a job. And when I work with clients, that’s one of the things we do is we practice how to make those decisions. We’re looking at your upcoming checks. We’re accounting for the bills that need to be paid. We’re making sure that you actually have money for the things that are important to you. And then we’re deciding how much money you can put towards debt. The goal is for you to understand what your money needs to do before you start moving it around.
I want to go back to the client that I told you about earlier. She already knew that she needed to go through her credit card. She’d known that for years. But when we worked together, we actually did it. We opened the account, we looked at what was happening, and we started making decisions. And that’s really important and it’s what you get when you hire a coach. So sometimes you don’t need another person to tell you what you should look at on your credit card statement. You need the support to work through the thing that you have been avoiding. You need someone who can help you figure out what to do with the information once you have it. You need the support for when like that burning sensation in your belly starts or your shoulders get tight. Like that’s what you need the support to do.
And you need a way to keep making those decisions as your circumstances change. Because your financial life isn’t going to stop changing because you paid off your credit card. You’re going to get raises. You’re going to have unexpected expenses. You’re going to want to travel. You might want to buy a house, have a baby, or make some other big financial decision. And I want you to have a money practice that can support you through those changes. So I want you to try something this week. If you’ve been listening and thinking, okay, Keina, I need to look at my credit card. Here’s what I want you to do. I want you to open up your most recent credit card statement. And I want you to look specifically for recurring charges. What subscriptions are coming out? What services are you paying for?
What bills have you connected to your credit card? And which of those expenses are actually included in your budget? And here’s the thing. I don’t need you to cancel anything. I don’t need you to decide today that you’re never going to use your credit card again. I want you to choose one expense and I want you to make a decision about it. Maybe you decide that you love your meal prep subscription and you want to keep it. Great. Now let’s make sure you’re actually accounting for that in your budget. Maybe you realize you’re paying $40 a month for something you haven’t used in six months. And then you decide whether you want to cancel it.
I actually have a great client story about this, just this week. One of my clients, I helped him pay off his credit card about two weeks ago. And he sent me a message. He was like, oh my goodness. I was charged last month $140 and I didn’t realize that I got charged for. He had like a facial subscription that he signed up for because this was the year that he’s like, I want to be able to take care of myself. And so he was only like this self-care kick. But what he wasn’t paying attention to was what was happening on his credit card. That credit card was a bank account for him. And he didn’t realize until he called to schedule what he thought was his last appointment. And I guess he found out that he had like two appointments because he had been charged last month.
So long story short, he went in and asked for a refund. But that’s like a perfect example of being able to look at your credit card and say like, oh, there’s stuff on here that I didn’t realize is on here. But also I have agency to decide what I want to do about this. So the biggest point is that I want you to start paying attention to what’s happening with your credit card. And then we have to decide how are those expenses fitting into the rest of your life. Your credit card can’t be just a hiding place for the things that you want to be able to do. And if you’ve been avoiding this for a long time, I want you to notice what happens when you actually sit down and you do it. Because sometimes the thing that you’ve been thinking about doing for six months is something that is going to take you five minutes or even ten minutes.
Now if you’re listening to this episode and you’re thinking, Keina, I have like twenty to thirty thousand dollars in credit card debt and I’ve paid this off before. But I don’t understand why I keep ending up in the same place. I would love to invite you to work with me. Because this is exactly the kind of work that we do inside of my five-month coaching partnership. We work together. I’m not just telling you how much money to pay towards your credit card. But we’re going to look at what’s actually happening with your money. We’re going to look at your checking account, your credit cards, your bills and the expenses that you might not even be accounting for. We’re going to talk about the things you want to do with your money. Because I want to know, like what’s on the other side of you being able to pay off your debt. You want to buy a house? Do you want to have a baby?
Are you looking to travel without feeling like shame when you come back for it? You just want to be able to travel and know that you can afford it? Do you want to be able to get paid on Friday and then know exactly what your paycheck needs to do? Like all of those things matter to me. And what we’re going to do in my five month coaching partnership is build a budget that helps you make those decisions about your money while you’re working towards the goals. You’re also going to have support as you practice using the budget. Because I know that life is going to happen. You’re going to have weeks when things don’t go according to plan. You might overspend. You might have an expense come up that you didn’t anticipate.
And I want you to know how to work through those situations without automatically reaching for your credit card. Or feeling like you need to start your entire financial plan over again. So if you’re ready to stop going through the cycle of paying off your credit card and watching the balance grow again, I would invite you to apply to work with me. We’ll talk about what’s happening with your money right now. What you’ve tried before and what you want to accomplish. And then I’ll tell you exactly how the five month coaching partnership would work for you based off of your needs and your goals. So you can go to my show notes or you can go to wealthovernow.com and you can book a call there.
But before we go, I want to leave you with one question. If you paid off your credit card before, what happened after you paid it off? I want you to really think about that because you may have already proven to yourself that you can pay off debt. Now it’s time to think about what needs to change so you can stay out of debt. And that’s what I want for you. So until next time, have a great week and I will see you next week.
Outro: Thank you so much for listening to Money Files. If you’re ready to take the next step to reach your financial goals, head to www.wealthovernow.com/appointment and let’s get started.
