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Many people know when they’re struggling financially. Intuitively, we feel the pressure of not having enough cash to meet all of our obligations. If you live on a cash basis, you will find yourself with no choice but to stop spending when the money runs out.

Credit and debt distort our instincts. When you use a credit card or Buy Now Pay Later services, like Zip Pay, instead of paying outright, you don’t feel the same sense of pressure. Because they are designed for ease of use, it can be just as easy to lose track of your debt.

Although money problems can feel obvious, debt problems might be harder to identify. Here are some warning signs that indicate your debt might be building to a crisis – plus, insights on how to fix your debt problems in its tracks.

10 Indicators Your Have Debt Problems

1. You make only minimum payments.

However, minimum payments are designed to keep people in debt longer. By only chipping away at the debt, you’re stuck repaying your debt month-to-month while interest racks up.

No matter your debt levels, making minimum payments is a problem. Even if your debt is relatively small, you could spend decades paying it off if you only pay the minimum required monthly payment.

2. Your minimum monthly payments are large.

When debts are scattered, it’s important to add up the monthly payments to work out exactly how much you’re dedicated to repaying them.

Take a look at your bank account and/or credit card statements and write down all your minimum payments and add them together. Ideally, the amount of money you’re paying towards your debt should not exceed 15-20% of your income. Paying over this threshold puts you at risk of not having enough income to cover your rent, food, transport costs and other necessities.

3. You’re struggling with debt collectors.

The stress from debt collectors calling or creditors threatening you with things like repossession is the last thing anyone needs. However, this debt problem can only really be solved by settling your outstanding debts.

If you have the money to pay off your debts, you should begin to make payments every month. Making payments on time will not only lower your debts, but it will also stop collectors from making these threats.

4. You’re using balance transfers and refinancing to stay afloat.

Balance transfers, or the act of transferring outstanding balances from one card to another, is a common transaction for those looking to lower their monthly interest rate payments. Similarly, many homeowners refinance their homes to pay down revolving debts. But if you’re considering one of these two options regularly, you have a debt problem.



Before taking on new debt to pay off existing debt, you’ll need to address the root causes of your debts and change your behaviour going forward or else there is a high potential it will end in disaster.

5. You rely on cash advances.

The worst way to use a credit card is to get a cash advance. Not only is the money loaned to you at the worst possible terms, it often comes with high one-time charges as a flat rate or a percentage of the amount. A $1,000 cash advance could have a one-time fee of $50, plus interest for any unpaid balances. Never get a cash advance unless it’s a genuine emergency. Using cash advances for regular bills and expenses is a sign of a debt problem. If you’ve already taken out cash advances to pay back other debt, make repaying this advance a top priority to avoid paying its drastically higher interest rate.

6. You’re being denied for loans or credit cards.

Once you’re turned down for a loan or credit card, or even if you can only get a loan under very poor terms, stop and examine your situation.

If your excessive debt levels lead a lender to deny or refuse to extend further credit to you, you probably have a debt problem. The more you apply the more it will impact on your credit score. Before you apply for new credit consider your debt solutions options for paying back your current debt, improve your current debt-to-income ratio and increase your creditworthiness.

7. You’re not building your savings.

Every month, you should be putting money into savings. This takes many forms: building an emergency fund, saving a house deposit, saving for retirement. If your budget does not include a savings plan, start right now.

If you simply can’t save because there’s not enough money left over after paying your bills, you may have a debt problem. If your savings are decreasing instead of increasing or if you’re dipping into your retirement funds to stay afloat, you have a debt problem.

8. You’re unaware of your debt problems

Ask yourself – Do you know exactly how much debt you have and what it will take to be completely debt free? If you don’t have ready answers to these questions, you have a debt problem.  If you avoid opening your credit card bills or emails because you don’t want to see how bad things are or avoid unknown phone calls, then you already know you have a debt problem, and it’s time to do something about it.

9. You’re over-limit or getting declined at the point of sale.

Credit cards are useful for daily costs, especially when the balance is settled regularly. If you have a card that is maxed out or near its limit, you have a credit card debt problem. If you have to try more than one card at the register until one of them is accepted, it’s time to stop borrowing and take control of your situation.

10. Your debts are affecting your personal relationships.

Do you actively keep your partner in the dark about your debt situation? If so, you need to take a look at your finances and find a way to become proud of them. Whether that’s being honest with yourself about your position or starting to pay down debts until you are, you’ll need to find relief.

Hiding financial information from your loved ones is a strong sign of a debt problem. Check out Is bad credit destroying your relationship? for advice on tackling financial stress in your relationship.

How to Fix Your Debt Problems

There are plenty of other warning signs to look out for with regard to financial troubles; the ten listed here focus specifically on debt. If you are struggling with debt, or showing any of these warning signs, Fix Bad Credit can help. Our coaches can help you create a budget and come up with a personalised, tailored plan to help you take back control of your money and start on your journey towards financial freedom.

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