5 signs you’re falling into a debt trap

By Kimberly Rotter

Reviewed by James Heflin

Apr 10, 2023

Read time: 2 min

SOC_WTFINANCE is a debt trap_1280x720_01.jpg

The day I used a balance transfer from one credit card to make the payment on another was the day I knew I could no longer handle my debt. I juggled my finances a bit and was able to put off the inevitable by one more month, but things got worse before they got better.

Being stuck in debt is a little like being a hamster running on a wheel. That little guy runs, and runs, and runs until he’s exhausted, but he doesn’t get anywhere. When debt takes over, you pay, and pay, and pay, but the goal never seems to get any closer. Feelings of loneliness and hopelessness turn a financial problem into an emotional crisis.

Thinking about the warning signs shows a healthy fear of falling into a debt trap, and could mean that you’re ready to start turning your finances around (or help a loved one).

Here are a few red flags that could be signs of a debt trap. 


1. You borrow for everyday essentials

Lots of people use credit cards for groceries, especially if they have one of those cards that pays cash back on grocery store purchases. Using a credit card isn’t a problem. Carrying a balance is the red flag to look for. 

Think of it this way. It would probably feel odd to walk into a bank and ask for a loan to cover this month’s food. Hopefully, the banker would gently explain that if you can’t afford your groceries, it’ll be hard to pay that loan back. Also, if you have negative cash flow, it’ll be hard to qualify for the loan in the first place.

Borrowing money for everyday expenses is giving yourself a loan that you can’t afford.

2. Your credit card balances get bigger every month

Credit cards are an expensive way to borrow. In a perfect world, we’d all pay off our entire balance at the end of each month. That doesn’t always happen, and that’s okay. But after you use your card to cover expenses, try to make monthly payments that are big enough that they generally help the balance go in a downward direction. If your balances are growing and you have no concrete payoff plan, you could be headed for a debt trap.


3. You avoid looking at your finances

Do you avoid opening your mail, or maybe stash it in a drawer? Do you dread paying bills at the end of the month because the numbers are so unpleasant? Hiding from reality is a sign that there’s a problem.  

4. You’re stuck in a borrowing cycle to pay debts

If you take a balance transfer or cash advance from one credit card to pay another credit card because you can’t afford your monthly payments, you’re probably already in a debt trap. Moving money around is a temporary fix that can only hold you over for a very short time. It’s like being a circus performer who spins plates on sticks. It takes a lot of skill and effort to keep them spinning. You can only handle so many plates, and no one can keep them spinning forever. The plates eventually have to come down. Either in a controlled manner or when they fall.

5. You’re dishonest about your money situation

Hiding financial information or lying about it might mean that you’re embarrassed or ashamed of your money situation, or that you’re afraid of what'll happen if anyone finds out. Dishonesty doesn’t change the facts, though. If you sense an urge to keep secrets or make up stories, that’s a sign that there’s a financial problem that needs your attention.

No matter how unpleasant these situations feel, it’s an act of self-love to acknowledge them, at least to yourself. If any of this hits close to home, complete a free debt evaluation form and let a professional debt advisor walk you through your options.

kim rotter 2022 2

Kimberly is Achieve’s senior editor. She is a financial counselor accredited by the Association for Financial Counseling & Planning Education®, and a mortgage expert for The Motley Fool. She owns and manages a 350-writer content agency.

James Heflin - Author

James is a financial editor for Achieve. He has been an editor for The Ascent (The Motley Fool) and was the arts editor at The Valley Advocate newspaper in Western Massachusetts for many years. He holds an MFA from the University of Massachusetts Amherst and an MA from Hollins University. His book Krakatoa Picnic came out in 2017.

Article Topics

At Achieve, it’s not what we stand for, it’s who.

Achieve Person