Why You Shouldn’t Be Living on Credit

It is not uncommon for people to be living from one paycheck to the next. As many families are still facing the after-effects of the recession, it is still a struggle to make it from one week to the next. However, if you have come to a point n life where you find you are buying regular, everyday items using your credit card, it may be time to get help.

Credit is Not an Extension of Your Pay

If you have $100 in your bank account and a $1500 credit limit on your credit card, the reality is you do not have $1600 to spend. People have often made the mistake of using credit limits as an extension of their income. If there is room to spend on the credit cards, they feel they are not broke.

Responsible spending on credit means you have the actual cash in the bank to back up what you have purchased on credit. If you find you are going to the convenience store every day to pick up basic staples like milk and bread and then paying with credit, you are headed for more trouble than you may realize.

Credit Card Usage

Again, the rule of thumb for using credit is to only purchase on credit what you have in cash to pay for at the end of the month. Credit cards should not be used for impulse spending or to tide you over until the next payday. Using credit improperly is just setting the stage for a vicious cycle of debt. When you purchase milk on credit, you spend the $4 for the milk, plus the interest costs, plus any fees incurred when you didn’t pay off the full balance each month. If you are not careful, you’ll be paying for that one gallon of milk for many years to come.

Credit cards should be used wisely. Here are some positive reasons to use credit cards:

Emergencies – a credit card is a viable idea in the event of an emergency when you can not access the cash you need such as for car repairs, travel arrangements, and other unexpected situations.

Rewards – provided you have the cash to pay off the balance in full each month, you can get a lot of benefits out of using credit cards that have accompanying rewards programs.

Boosting Credit – you can use credit cards to your advantage because responsible use promotes higher credit scores. Paying on time and in full each month will allow the credit card companies to report back positive information to the credit bureaus. This information is favorable to lenders when you are seeking financing or lines of credit.

Necessity – there are some situations where you need a credit card including making hotel reservations, renting cars, and other common scenarios.

Time to Get Help

If you have been living on credit for any amount of time, you may need the help of an outside resource such as a credit counseling service. These agencies often work for free and can help you analyze your spending, debt totals, income, and budget to come up with alternative means for becoming financially stable.

There has been a lot of talk about debt and living a more frugal life in recent years so pride should not stop you from seeking the help you need to fix your finances now before the problem is compounded. Debt is one problem that will not go away when ignored. If you want to repair your credit and regain your life, stop living on credit and find better ways to manage your income.