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Q1. What did you learn about your topic that surprised you the most?

A1. I learned how slippery credit debt can be. Though I thought I had a decent understanding of it before, I never realized quite how much the interest rate can make paying off the statement a tall task. The fact that if you only pay off the minimum requirement you are only paying off interest was wild to me because you will just continue putting money towards your debt and making no impact on it.

Q2. Provide a real-life example of how this topic is relevant or interesting for you.

A2. This is relevant to me because, like many people my age, I have a certain amount of debt from multiple sources - credit and student loan. From learning tips the articles and videos supplied I now know more about my debts and how to stay on top of them. Having first hand been in more credit debt than I wanted to be at a certain point in my life, it is nice knowing the exact reasons why I was in that, and how to not get in that position again.

Q3. If you could pass your knowledge to a family member or friend, what do you think is the most important thing to pass on.

A3. I would say the most important is to use credit cards carefully, but make sure to actually use them! Many people will say credit debt is so dangerous that they don't recommend you use a credit card at all. This is awful advice because then you will make building a credit score very hard on yourself. A credit card is an excellent way to establish a credit score - especially for younger people. Use credit cards, pay high or full amounts on time to create and maintain a high credit score.

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This cartoon explains in a humorous way how if you aren't careful with credit cards, expensive items become even more expensive if you aren't careful 

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This cartoon explains in a humorous way how if you aren't careful with credit cards, expensive items become even more expensive if you aren't careful 

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This is a great video of 2 Canadian individuals explaining student loan debt and what they wish they knew when they first got started in taking loans.

This video is excellent because they give great tips for how young people can stay on top of their student loans to prevent being in heavy debt from people experiencing it first hand.

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STUDENT LOAN DEBT: What I Wish I Knew (Canada)

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This video explains debt traps among Canadians. In this video you will learn about a young Canadian woman named Jennifer's debt troubles stemming from credit after post-secondary.

She has a fantastic point about debt "sneaking up" on you. This is extremely true because a very large cause of debt in Canada is from tiny purchases or subscriptions building up slowly until it becomes a large sum which is difficult to pay off.

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This article by the famed MacLeans shows how Canadian homes have become debt traps over the years.

I chose this website because this shows how our market has been getting worse and worse over the years and is making it nearly impossible for young people to purchase their own homes.

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In 1998, Ann bought a one-bedroom condo in the Kitsilano area of Vancouver. Gainfully employed at a printing company, she found the monthly mortgage payments were within her budget (Ann and others quoted in this story asked that Maclean's not use their full names). The building was on the older side, and eventually she got the itch to update the decor. She intended to replace only her bathroom sink; she ended up renovating the entire bathroom. "I remember thinking, 'Well, now that I've started...' " The kitchen came next, then the living room and finally the bedroom. Ann thought the renos, funded partly on credit and spaced out over a few months, would boost her condo's value. She also wanted to keep up with her neighbours. "Everyone was doing something," she says.

Finances became tight afterwards, and she only paid the minimum on her credit card each month. Every year, her condo fees rose while her salary at the printing company (where she still works) stagnated. She began relying on credit for everyday expenses, and later took out a second card.

Soon, one of her banks began calling with a solution to help manage her debt. She ignored the inquiries, preferring not to think about her finances, but she started to feel desperate: "I just wanted to do something, and that was the only thing coming my way." The bank offered a loan at a low rate to pay off her high-interest credit card debt, and she ended up taking out a second mortgage for $80,000. The interest rate still wasn't manageable. "It was a huge mistake," she says.

READ MORE: After weathering the Great Recession, can Canada avoid a debt crisis?

Saddled with two mortgages, rising condo fees and a flat income, she continued relying on credit cards. Surprise expenses, such as dental work, added to her debt. Embarrassment kept her from seeking help. Three years ago, she decided to sell her condo. Despite Vancouver's booming market, the sale didn't solve Ann's financial problems. She moved in with a friend and was able to pay off her mortgages, but she couldn't make much of a dent in her credit card debt.

In 2017 year, Ann turned 64. She was carrying $70,000 in debt, and knew she couldn't work another decade to pay it down. That realization prompted her to seek help, and she eventually met with an insolvency trustee. Ann's trustee filed a consumer proposal on her behalf. Less severe than personal bankruptcy, a proposal is an offer to all of an individual's creditors to pay a portion of debt under a strict plan over a maximum of five years. The remainder is discharged. Creditors typically agree to these arrangements since they are guaranteed to recoup at least some of their money. For Ann, filing a proposal came as a relief. "I actually feel like I can breathe again," she says.

Other Canadians are still suffocating. In early 2017, the household debt-to-income ratio hit another record of 167.8 per cent. A long period of abnormally low interest rates has enabled Canadians to carry massive debts, since monthly payments appear manageable. Further, in cities with rising home values, particularly Toronto and Vancouver, homeowners can secure a home equity line of credit (HELOC) to pay other debts or simply fund their lifestyles. In spring of 2016, the Financial Consumer Agency of Canada warned that the increased use of HELOCs "may lead Canadians to use their homes as ATMs, making it easier for them to borrow more than they can afford."

Insolvencies, though, are rare. As of the end of July [2017], there were nearly 123,000 consumer proposals and personal bankruptcies filed by Canadians in 2017, a decline of 1.2 per cent from the same period in 2016. That might be a sign of fiscal prudence, but it's also the result of record low interest rates that ease debt-carrying costs. Scott Terrio, an insolvency estate administrator and president of Debt Savvy in Toronto, calls this phenomenon "extend and pretend." Canadians can extend their debt repayment terms and pretend to live a lifestyle they can't otherwise obtain. He sees it all the time-couples with decent jobs carrying large mortgages, and putting daycare, cars and vacations on credit.

RELATED: Canadians pile up debt faster than anyone in the world

Some reach a trigger moment when they can no longer pretend-a job loss, say, or divorce or illness. But lately Terrio has noticed a change in his business. More clients are coming in because they're simply tapped out. As with Ann in Vancouver, there is no trigger. "It's a gradual realization for some people," Terrio says. "They can't do it anymore." Lana Gilbertson, an insolvency trustee in Vancouver, has seen the same change. "Nowadays, they have jobs, they're making money, they're plugging along, but they're just in over their heads," she says.

The cost of borrowing is set to rise, adding strain to households. The Bank of Canada hiked rates twice in 2017, signalling more could be coming-depending, in part, on whether households can handle it. Economists at TD Bank Group believe two more rate hikes are likely next year. That will cause rates on everything from lines of credit to car loans to mortgages to tick up. At the same time, house prices are not rising as quickly as they once were in many Canadian cities. RBC Economics forecasts home prices in Canada will increase 11.1 per cent in 2017-and just 2.2 per cent in 2018. Canadians won't be able to pull cash out of their homes so easily to get themselves out of trouble. "The insolvency business is cyclical, and we're at least a year overdue for shedding blood in the system," Terrio says. "If ever we were poised to hit that right on the head, it's now."

For some Canadians who struggle with debt, the problem can be traced back to real estate. In a survey TD released in September 2017, 56 per cent of respondents from across Canada were willing to exceed their budget by up to $50,000 to purchase a home. At the same time, 97 per cent of homeowners said they wished they'd factored in other obligations before buying, such as property taxes, maintenance costs and "overall lifestyle expenses."

The problem is not confined to Toronto or Vancouver, where huge price gains have enticed buyers to stretch themselves for fear of getting permanently priced out. In Regina, Joshua and his wife purchased a house in 2014 when expecting their first child. Both 24 years old at the time, they carried about $35,000 in debt between them, mostly tied to student loans. "We rushed into getting a house because we just thought it would be the right thing to do," Joshua says. "It almost felt wrong to be renting and having a kid." (Joshua's mom pressured them to buy, too.) In one weekend, they viewed 16 houses. The very last one felt right. They put down five per cent and moved in.

But the couple was blindsided by maintenance costs. Their furnace needed repairs, and they later had to replace the water heater, which set them back hundreds of dollars. After expenses, the pair has virtually no cash to put toward their debt. Joshua's card is maxed out, and his wife's card is close to the limit. Joshua says they're frugal (splurging means going to Subway) and live paycheque to paycheque. The situation became worse this year. His wife is on maternity leave with their second child and their variable mortgage rate ticked up. "Just the way the rate is fluctuating is killing us," Joshua says, who works in sales at a telecommunications firm. "It can't keep changing like this."

Staring down tens of thousands of dollars in debt, rising mortgage costs and no foreseeable way to substantially boost their incomes, the couple decided to sell their house and rent. They're not expecting a windfall. A while back, their basement flooded and they used the insurance money to repair the foundation. The basement had been finished, but there's no cash to renovate it, so it will be sold in "as is" condition. The market in Regina is also soft, and the average home price is down slightly from 2014. Joshua hopes to at least get his down payment back, and their financial situation should improve when his wife returns to work as a massage therapist. "We'll be able to really hack away at our debt," he says, "but it's going to take years."

While real estate has led to financial distress for some Canadians, it's been a saviour for others. The home equity line of credit has allowed millions of households to borrow against their properties, providing cash for everything from renovations to investing to debt consolidation. HELOCs have been around in Canada since the 1970s, but in the mid-1990s, lenders started marketing them to a wider swath of consumers. Between 2000 and 2010, HELOC balances soared from $35 billion to $186 billion, according to the Financial Consumer Agency of Canada, an average annual growth rate of 20 per cent.

The pace of growth has slowed since then, but balances still hit $211 billion in 2016. Lenders have been all too eager to dole out HELOCs, creating the perception of instant, easy money. An animated commercial for Alpine Credits, a lender in B.C., features a room full of employees rubber-stamping loans-even for a client who wants to install a four-storey waterslide. (The employees celebrate by cheering while one pops open champagne and another tears off his shirt.)

RELATED: Praying for a real estate crash

One common use of HELOCs is to pay off higher-interest debt. In 2016, according to Scotiabank, Canadians used $11.6 billion (or 28 per cent of HELOC withdrawals) for debt consolidation. Doug Hoyes, a founder of licensed insolvency trustee Hoyes, Michalos & Associates, has witnessed the shift. The firm has offices across Ontario and in 2011, roughly one-third of the firm's clients owned a home when they filed for bankruptcy or a consumer proposal. Last August, just six per cent of insolvent consumers were homeowners. "You don't need to file a proposal to pay off your debt," he says. "You just go out and get a second mortgage."

If the pace of home price appreciation slows down-or worse, prices drop-there will be consequences for households that have been piling on debt. The slowdown in the southwestern Ontario real estate market is already creating stress. Hoyes recently saw a couple who purchased a home four years ago and accumulated $70,000 in unsecured debt. They bought furniture, hired landscapers and borrowed to finance a swimming pool. Before the slowdown, the couple might have earned $100,000 by selling their home. Now they might get $70,000, which would barely cover their debts. They're also reluctant to sell and move to a different neighbourhood. And because of the softening in the market, they haven't been able to find a lender willing to issue them a HELOC large enough to cover their unsecured debt. Their solution? Convince one set of parents to take out a second mortgage, and borrow from them. "It's the bank of mom and dad," Hoyes says.

And while debt consolidation is an effective strategy if consumers don't fall back on bad habits, Terrio says recidivism is a problem. "They go ka-ching out of their house and pay off their credit card debts, but they go and run up their cards again," he says.

Borrowing against her home wasn't enough for Charis Sweet-Speiss to pull herself out of debt. A registered nurse, she divorced and moved from Ottawa to Oliver, B.C., a town south of Kelowna, in 1998. Her then-boyfriend (now husband) wasn't working at the time, and the couple used the divorce settlement to start building a new life; they bought a used car, a place to live and furniture. "Then that money was gone, so I just started using credit cards," she says. "And it was so easy." Their debt started building, and their income wasn't sufficient to pay more than the minimum. New credit cards she'd never asked for arrived in the mail, and Sweet-Speiss started using them. She had 13 on the go at once, and eventually they were all maxed out. "I've always been employed. I make a good salary. But just paying the minimum every month was a lot of money," she says. Every six months, she phoned each credit card company to wheedle them into reducing her interest rate. She caught some breaks, but never enough to make a big difference: "It was a horrible way to live."

Sweet-Speiss says she wasn't frivolous with her spending, but in retrospect, she made questionable decisions. When her daughter would run up a large balance on her own credit card, Sweet-Speiss sent her money-even though it meant sinking deeper into debt herself. Sweet-Speiss borrowed against her home at one point and withdrew money on two separate occasions to consolidate her debt, but was still left with $40,000 on her cards, and it built up again.

After more than a decade of amassing debt, Sweet-Speiss turned to the Credit Counselling Society for help ridding herself of nearly $67,000 spread across 13 cards. Once enrolled, her interest payments stopped and she was put on a plan to pay down principal. She completed the program this in 2017. She still has a mortgage and a line of credit, but is finally free of high-interest credit card debt.

Sweet-Speiss says her mortgage would have been paid off a decade ago had she never borrowed against her house. Indeed, one of the problems with home-equity loans is that they cause debt persistence. HELOCs are marketed with little or no obligation to repay in a timely manner. For years, one of the main advantages of owning a home is the forced saving effect-paying the mortgage, combined with rising property values, builds equity. A HELOC undermines that dynamic, tempting consumers to access cash now rather than build wealth over the long term.

It marks a fundamental shift in the way Canadians think about homeownership. "Whatever happened to getting to the end of a mortgage and owning your home?" says Gilbertson, the trustee in Vancouver. "It's less about truly owning our homes today and more about having another revenue stream to fund our lifestyles."

VIDEO: How to keep from drowning in credit card debt

That Canadians are carrying record amounts of debt is not in dispute. But the magnitude of the problem is contested. "I think the fears are overstated," says Paul Taylor, CEO of Mortgage Professionals Canada. "Canadians are incredibly prudent, and history will show that." As the head of an industry association for mortgage lenders, brokers and insurers, Taylor isn't exactly impartial on the issue. But he points to a report from the Parliamentary Budget Officer released in 2017 showing that, since 2009, the debt service ratio-a measure of income spent to pay debt-has remained steady at around 14 per cent, not much higher than the long-term average. That's a sign that even though we have more debt than 20 years ago, we're not overextending ourselves, Taylor says.

But the same PBO report projects the debt service ratio will rise to an all-time high of 16.3 per cent by the end of 2021. Taylor says the premise is a "little bit flawed" because it presumes Canadians will make no changes to their finances owing to higher interest rates. "I'm certain people will become prudent again to ensure they retain that [historical] expense ratio," he says. Already, brokers have been fielding calls from Canadians about locking in their mortgages to guard against future increases, for example.

Bank of Montreal chief economist Douglas Porter also contends that too much emphasis is placed on the debt-to-income ratio. "We have long been of the view that much of the commentary on this topic has been overwrought," he wrote in a research note this month. The savings rate is close to the 25-year average of five per cent, which doesn't point to a consumer debt apocalypse. Rather, Porter expects spending to "gradually moderate" as borrowing costs rise.

Still, numerous surveys show Canadians are worryingly close to the edge. A report from MNP Ltd., an insolvency trustee, released in October 2017 found 42 per cent of Canadians said they don't think they can cover basic expenses over the next year without going deeper into debt. An earlier survey this summer found 77 per cent of respondents would have trouble absorbing an additional $130 per month in interest payments. And as organizations such as the IMF and the OECD have constantly warned, high household debt renders the country far more vulnerable to economic shocks.

When a downturn does hit, even a high income won't necessarily provide enough protection. Gene moved from the U.S. to Calgary 12 years ago to take a job with a major oil company, earning more than $300,000 annually. He purchased a home for close to $1 million and supported his wife, two kids and mother-in-law. In 2015, Gene lost his job when the price of oil crashed, and was out of work for nine months. He took out a home equity loan for $30,000 to make ends meet, and eventually found another job at a pipeline company, but for half his previous salary. A six-ﬁgure income would be more than enough for most Canadians, but Gene and his family were accustomed to their lifestyle. The kids were enrolled in extracurricular activities, and housing costs added up to $4,100 every month.

A year later, Gene was laid off again. "It was just devastating for us," he says, adding that he began questioning his self-worth if he was unable to provide for his family. He eventually found another job, but at a still smaller salary. On top of the mortgage and the line of credit, Gene had another $20,000 loan. When he first purchased his house, he didn't quite hit the 20 per cent down payment threshold; his bank offered him a loan to cover the difference. He had a couple thousand in credit card debt and a small, high-interest loan from EasyFinancial he'd taken to cover an unexpected medical expense for a family member. Finally, he faced a $90,000 tax bill, since he opted not to pay after he lost his job. Gene sought help from an insolvency trustee in 2017. "I just wasn't making enough money, and I had to protect the family," he says. Gene submitted a consumer proposal, but one of his creditors rejected the terms. In October, Gene filed for bankruptcy-just over two years after making a salary most Canadians can only dream of.

This sort of precariousness worries some experts, who fear wider implications for the Canadian economy. "We continue to see the household sector as accident-prone, with a complacency toward debt which could prove disruptive to the economy," wrote HSBC Canada's chief economist recently. The result is Canada is at "some risk" of a balance sheet recession-a period of slow growth or decline caused by consumers saving and paying down debt rather than spending. David Madani, an economist with Capital Economics in Toronto, doubts the growth Canada has seen in exports recently will be enough to offset the decline in consumer spending. "Canadian policy-makers have allowed household debt to rise above the disturbingly high levels reached in the U.S. in 2007, raising the risk of a similar potentially disastrous deleveraging down the road," Madani wrote.

Statements like that could be dismissed as fear-mongering, but the reality is Canada hasn't been in this situation before, and the outcome is impossible to predict. Canadians ignored warnings from policymakers about piling on debt for years because low interest rates were too enticing. Now households will have no choice but to dial it back. The only question is how bad the fallout will be.
RELATED: MORE ABOUT DEBT:

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How Canadian homes became debt traps - Macleans.ca

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In 1998, Ann bought a one-bedroom condo in the Kitsilano area of Vancouver. Gainfully employed at a printing company, she found the monthly mortgage payments were within her budget (Ann and others quoted in this story asked that Maclean's not use their full names).

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This Canadian website shows the top 5 reasons Canadians are in debt. My primary takeaway from this is not being disciplined with your money. It is so easy spend money carelessly, especially as students.

I chose this website because this shows that Canadians and Americans have near identical debt traps as our markets are almost carbon-copies.

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If you're like many other Canadian consumers, you likely have some debt on your plate. The average Canadian owes $8,500 in consumer debt, and that's not even including their mortgage. And about 12% of Canadians have consumer debt over $25,000, while another 14% have debts between $10,000 and $24,999.

That's a lot of cash to owe to creditors, especially when you're talking about debt that's attached to a high-interest rate. Which means those numbers will continue to climb, making it increasingly difficult to pay down debt, especially when expenditures continue to occur.

In fact, credit card debt is an ongoing problem in Canada, considering how easy it is to pay with plastic rather than with cash. And considering the sky-high interest rate that typically comes with credit cards, it can be incredibly difficult to pay down such debt as it mounts.

So, what's the real reason why debt in Canada is so high? Here are some of the more common reasons why Canadian consumers find themselves in debt.

Abusing Credit Cards

We've already briefly touched upon the credit card issues, but it is certainly worth mentioning more than once. Perhaps the most prevalent and common reason for consumer debt is the overuse and abuse of credit cards. While credit cards are meant to make it convenient to spend money without having to access cash - as well as all the rewards and perks that come with them - they can also put you in financial trouble if you're not careful with them.

Credit card debt can be very difficult to climb out of, especially when you take into consideration how high the interest rate can be on this type of debt. Credit card interest rate can be as high as 22% or more, and when the outstanding debt load increases, the interest amount paid can be astronomical.

Unless you get a handle on this debt and pay it down religiously, you could wind up with credit card debt that is a lot more than you can handle.

Missed Payments

Even one missed payment can put you in a precarious situation with your finances. With each missed payment, your outstanding debt load will continue to inch higher, bringing your debt load to a point that will make it much more difficult for you to pay down. And with every missed payment comes a late fee that's tacked on to what you already owe, bringing your debt even higher than it was before.

Spending More Than You Can Afford

This sounds pretty obvious, but it's worth mentioning. If you spend more money than you actually bring in, you can certainly expect your debt load to mount. Unfortunately, many Canadian consumers find themselves in this position, which is another common reason for mounting consumer debt in Canada. People like to have nice things, go places, and travel. But not everyone can necessarily afford what they want, but they spend like they can anyway.

If you spend more than you make, you can definitely expect your debt to rise.

Not Having A Financial Cushion to Fall Back on

It's always wise to have a little bit of money saved and tucked away somewhere in case of a rainy day. The unexpected can always happen, and it's always important to be prepared. If you're not, you could be scrambling to take out payday loans with exorbitant interest rates, borrowing money from friends or family, or racking up your credit card to cover unexpected expenses.

Not Being Disciplined With Your Money

When it comes to money, you absolutely need to be self-disciplined and responsible with every dollar you have in your pocket. More specifically, credit cards tend to be the source of troubles for consumers who are compulsive spenders with little self-discipline. If you're not responsible with your money and your credit cards, you can quickly and easily see your outstanding balance grow to the point of no return.

How to Avoid These Debt Traps

So, now that you know what can get you into financial trouble, how can you avoid getting stuck in these predicaments? Here are a few suggestions.

Only spend what you have in the bank. This is particularly relevant when it comes to using credit cards. It might be easy to whip out the plastic in order to pay for items, but you could find yourself in a sticky situation once the bill comes. Only spend up to an amount that matches what you have in the bank - or much less, preferably.

Don't spend any more than 30% of your credit limit. It's widely suggested that consumers not spend the entire credit limit amount. Doing so will not only make it much more difficult to pay down the balance (as well as the interest portion on top of that), but it could also negatively impact your credit score.

Keep your down to make it easier to pay off your credit card bills in full every month while also credit utilization keeping your credit score in check.

Make your bill payments on time. Forget about having to pay late charges on missed payments. Instead, make sure every bill is paid on time and in full every month. Not only will this help you stay on top of your debt, but it will also help to keep your credit score healthy.

Save for an emergency fund. Having a financial cushion to fall back on can be a real lifesaver when the time comes. Try to save up about three to six months worth of all the bills you usually have to pay every month just in case you lose your job, you suffer a medical emergency, or your car breaks down, among other things.

Final Thoughts

There's a trend across Canada when it comes to growing household debt. Don't be part of this trend, as it will do nothing but bury you in debt that you'll find extremely difficult to climb out of. If you are currently having trouble dealing with your debt, Loans Canada can help . We've helped thousands of Canadians just like you, pay down their debt and get back on track to a healthier financial future.

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The Top 5 Reasons Canadians Are in Debt | Loans Canada

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If you're like many other Canadian consumers, you likely have some debt on your plate. The average Canadian owes $8,500 in consumer debt, and that's not even including their mortgage. And about 12% of Canadians have consumer debt over $25,000, while another 14% have debts between $10,000 and $24,999.

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This website, although American, shows 10 unexpected debt traps. 2 of these debt traps are very common particularly among college students; these traps are signing up for subscription plans and taking out long-term auto loans. Subscription plans are the simplest to relate with - almost everybody has Netflix. It doesn't end just there; there are subscription based businesses that are massively popular such as Spotify, Apple Music, Crave, Audible, and gym memberships. These all add up significantly when it comes to your month expenses. As with auto loans, buying a car as a student is extremely difficult. Long auto loans appear to make the purchase much easier as the payments are lower and many don't think of how much longer it will take to pay off the car and also how much more you'll be spending on the car with the interest.

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In theory, staying out of debt seems like a straightforward process: By not spending more than you can afford, you'll be debt-free. However, as millions of Americans with debt can attest, it can be more complicated than that. Common attitudes toward money-management and spending can make it easy to slide into debt.

"Our financial mentality is to buy now [and] pay later," says Leslie Tayne, attorney and founder of Tayne Law Group. The convenience of financing, expectations of family and misguided repayment attempts can all conspire to keep households in debt.

With that in mind, here's a look at 10 ways you could be digging yourself a bigger debt hole, and expert-approved hacks to achieve financial freedom.

Using savings to pay off debt. While it may seem like a smart idea to take money from low-earning savings accounts and pay off high-interest debt, it's a strategy that can backfire, says Kelsa Dickey, a financial coach with money management firm Fiscal Fitness Phoenix in Arizona. "What they are really doing is making it harder for themselves," she says.

Emptying a savings account to pay off debt leaves households without an emergency fund. Then, you may turn to credit cards or have to take out a loan should your car break down or a large medical bill arrive. And going into debt for every unexpected expense can be disheartening. Avoid this mistake by keeping adequate financial reserves to pay for emergency expenses.

Splitting cash among bills. Dickey says she often sees people use a divide and conquer method of debt repayment. A person who has, for instance, an extra $500 may send $100 to five creditors. It seems like a smart strategy to pay down all debts equally, but the reality is that small payments don't make much of an impact on the balance.

"You feel like you're never getting ahead," Dickey says. Without seeing progress, you may be less likely to try to tackle your debt problem. A better strategy would be to concentrate all extra money on one debt at a time to quickly see results and stay motivated.

Signing up for subscription plans. Subscription services are another unexpected contributor to debt, according to Mike Sullivan, a personal finance consultant with Take Charge America, a nonprofit credit counseling agency. People assume they don't have much impact because the monthly cost is often low, he says.

Streaming movies from Netflix or listening to music through SiriusXM for $10.99 a month may not seem like a high price to pay. However, if you subscribe to multiple services, the cost can add up and mean less money is available for savings, debt repayment or other goals. That's why it's key to be intentional about your subscriptions and only sign up for those you know you'll use regularly.

Financing purchases. Nowadays, financing is available for practically any purchase. For example, the online payment service PayPal lets its users take six months to pay off anything costing $99 or more.

"You're borrowing for almost every aspect of your life," Tayne says. Not only does financing have the potential to cost consumers extra money in interest charges, but it also sets them up to make purchases they wouldn't otherwise consider. For example, people may think twice about spending $1,000 for a phone, but it doesn't seem like a big deal when paid off in full over a two-year period.

Zero interest financing plans can be particularly appealing, but they may get people into trouble, Tayne says. "They think 'I don't have to pay that off for 18 months' and then in the 16th or 17th month, something unexpected comes up," she explains. Then, when the balance isn't paid off on time, the account may take on all the compounded interest from the previous 18 months. Rather than taking advantage of financing offers for retail products, save up and pay with cash to avoid running up your debt.

Taking out long-term auto loans. The standard term for auto loans used to be 36 months, Sullivan says. Now, many financial institutions will let you finance a car for 84 months, which is equal to seven years. "My experience with consumers is that very few can keep a car working for 84 months," Sullivan says. "They are underwater the whole time." That means consumers owe more than the car is worth and can't sell it to get out from underneath the payment. When the vehicle is replaced, they may have to roll their balance into a new loan and further increase their debt.

If you must finance a car, opt for an affordable model and finance it for as short a term as possible.

Playing the rewards game. Many credit cards offer lucrative rewards such as cash back offers or points that can be used for travel or merchandise. In order to maximize rewards, people may be tempted to charge purchases they wouldn't already make.

"I'm not anti-credit card, [but] it's a slippery slope," Dickey says. It doesn't take long for extra purchases to create a balance that can't be paid off every month. Then, interest charges may negate the value of any rewards earned. To avoid this scenario, it's best to limit discretionary spending on credit cards and only charge recurring bills or other expenses that must be paid.

Buying based on others' expectations. One of the reasons people go into debt is to keep those around them happy. "We spend not so much for ourselves, but for other people," Sullivan says. "No one wants to disappoint their spouse at vacation time or the kids at Christmas time."

Emotions can be difficult to navigate, and that's part of what makes this debt trap so difficult to avoid. Staying aware of your motivations before spending can help ensure purchases are made for the right reason. More important may be open communication with family members and friends to keep their expectations reasonable.

Failing to learn about financial planning. Many people find themselves trapped in debt because they don't understand financial basics. They may not realize how much interest is charged on payday loans or the total cost of buying something through a rent-to-own agreement. "These industries exist because people aren't very sophisticated," Sullivan says.

Fortunately, this is an easy problem to correct. Financial books, websites and apps, as well as financial literary courses, are readily available to teach basics of money management.

Ignoring your options. It's easy to get caught up in perceived social norms, but finance professionals say people need to remember almost everything you buy is optional.

You are not obligated to finance a degree from an expensive four-year school or drive a new car, Tayne says. "Those are choices." Community colleges and used cars may get you the same results at a fraction of the price. Rather than spending $100 a month on phone service, sign up for a low-cost carrier like Cricket Wireless or MetroPCS and pay less than half that amount. Scrutinize all your expenses to determine whether cheaper options exist. Paying less for these services will then free up money in your budget to keep you out of debt.

Assuming being debt-strapped is a way of life. Perhaps nothing traps people in debt as much as the mindset that they will always be in debt. "People don't challenge what they've always done," Dickey says. For many, having a car loan, credit card balance and mortgage is to be expected.

"The trick is to not buy everything someone tells you [that] you can afford," Sullivan says. Saying no to unnecessary purchases is a critical skill and essential to sticking to your budget and getting out of debt for good.

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10 Unexpected Debt Traps - and How to Avoid Them

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In theory, staying out of debt seems like a straightforward process: By not spending more than you can afford, you'll be debt-free. However, as millions of Americans with debt can attest, it can be more complicated than that. Common attitudes toward money-management and spending can make it easy to slide into debt.

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You might be asking yourself "what is a debt trap and how can I avoid them?" A debt trap is "a situation in which a debt is difficult or impossible to repay, typically because high interest payments prevent repayment of the principal." In this reading we will learn the most common types of debt traps - what makes them debt traps, and how to avoid them.