Using Credit Cards as Income - A definition

In my previous post, I talked about how you can use credit cards as a beneficial tool in your day to day finances.

In this post, I would like to talk about what using credit cards as income source means.

By allowing people to make minimum payments on their credit card debts, the credit card companies make it tempting to use credit cards as an income source.

The following are ways you could be using credit card as income.
1. Buying expensive items that you can't afford
2. Buying day to day goods on credit
3. Purchasing small items that you don't need and can't afford.

Buying expensive items that you can't afford
You say to yourself, "this item costs $1,000, but I can afford the minimum payments of $30".. I've heard this said so many times, and used as to how people justify their purchase.

What you're doing is giving yourself a $1000 payday bonus that's going to cost you alot in the end interest wise.

A better way to do this is .... Save up $30 per month until you can afford the $1,000 to make the purchase. It requires patience, however, if you really want the item then this is a better way to make the purchase.

Buying day to day goods on credit
You've spent all of your earnings and you still need money to buy day to day goods. You use your credit card to make up for the short fall in income.

This is a really bad trap to get into. What it tells the credit card company is that you do not have the ability to pay your bills, and that you're becoming a bad credit risk.

If you're running into this problem, it's a good idea to cut back expenses to the very bare minimum , and / or get another job to earn more money.

Even though access to cash advances on your credit card is easy to do ... trust me.. Using your credit card as income in this case will certainly cause alot of headaches in the future.

Purchasing small items that you don't need and can't afford.
You go to the mall and make several small purchases that you don't have the cash to repay.

You justify this by saying to yourself.. This necklace only costs $25. I can easily pay that off this month. The problem is you make several of these small purchases that add up. Eventually you start to carry a balance that you can't pay off each month.


IF YOU CAN'T PAY IT OFF EACH MONTH, THEN YOU'RE USING YOUR CREDIT CARD AS INCOME
Simply stated, you should always have enough cash in the bank to cover your credit card purchases. You should pay your account in full every month.

If you're carrying balances and paying interest, then you're using your credit cards as an income source.

I wrote this post to give people a new light to their credit card habits. In this economic crisis turmoil that's brought on by consumer spending and debt, I'm hoping that we can change the way people think about using their credit cards.

Use credit cards as a tool.. and not a source of income.